Federal Reserve's quantitative tightening program expected to end smoothly in December, avoiding market chaos

From Investing.com: 2024-06-29 06:01:02

Barclays analysts predict the Federal Reserve’s quantitative tightening program will end smoothly in December. Unlike 2019, when an abrupt QT halt caused market chaos, the Fed now employs caution and additional safeguards. Indicators signaling market strains are elevated, but the Fed’s proactive approach and expanded monitoring should ensure a seamless QT conclusion.

Barclays suggests that the Fed’s newfound attention to markets outside the fed funds market and the expansion of sponsored repo activity and central clearing since 2020 will lead to a smoother QT conclusion in December. Sponsored repo activity has doubled since 2019, boosting dealers’ balance sheet capacity through netting to avoid market stress.

With reserve levels above $3.4 trillion, the Fed is pursuing a cautious end to quantitative tightening in December, supported by measures to prevent market disruptions. Barclays anticipates a seamless conclusion to QT this year, crediting the Fed’s proactive monitoring and expanded balance sheet capacity through netting.



Read more at Investing.com: QT to end this December with hardly a whimper: Barclays By Investing.com