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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
FED
Atlanta Fed Pres Bostic noted in a CNBC interview today regarding balance sheet runoff that “our consensus is that a lot of that excess liquidity can come off and won't represent... significant tightening".
- Perhaps some of this thinking is to do with the eventual reversal of inflows to the overnight reverse repo facility, back into reserves. The December meeting minutes said "Some participants judged that a significant amount of balance sheet shrinkage could be appropriate over the normalization process, especially in light of abundant liquidity in money markets and elevated usage of the ON RRP facility."
- Despite continued (albeit slowing) Fed purchases, bank reserves in the system saw an end-month close below $4T at end-January for the first time since June 2021, as reserves were "recycled" into ON RRP (see chart)..
- Bostic's been an advocate of a fast balance sheet runoff, and part of the argument for swift shrinkage is that it won't cause undue stresses on financial system liquidity.
- It will be interesting to see in the January minutes whether this line of thought was becoming the "consensus" of more than "some" on the FOMC.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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