From Investing.com: 2024-11-09 04:30:00

Analysts at Alpine Macro noted that Quantitative Tightening (QT) by the Federal Reserve is ongoing, with a $2 trillion balance sheet reduction since June 2022. This has caused money market rate spikes and raised concerns about potential risks to financial markets.

The rapid decline in the Fed’s balance sheet has triggered memories of the 2019 liquidity crunch, but Alpine Macro believes a repeat scenario is unlikely in the current cycle. They argue that QT will not constrain bank lending, pointing to accelerating credit growth indicators.

Alpine Macro suggests that QT in this cycle will not disrupt funding markets or lending to the broader economy. They anticipate a controlled approach that should limit recession risks, support asset prices, and lead to a soft landing for the market.

Despite being a critical factor for market watchers, Alpine Macro believes QT does not pose an immediate threat to financial stability. Instead, they foresee a path toward market support, driven by credit growth and steady economic momentum as interest rates ease.



Read more at Investing.com: Is QT a threat to markets? By Investing.com