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By Evan Ryser
     WASHINGTON (MNI) - The Federal Reserve is practically engaging in
quantitative easing without officially announcing such a policy, President
Donald Trump's top economic adviser Larry Kudlow said Tuesday. 
     Asked whether the Fed's Treasury bill purchases is another way for the Fed
to quietly do QE, "I basically do," Kudlow said in a panel in Davos,
     "The net effect is they are expanding the balance sheet, whatever you wish
to call it. I think it's not a coincidence that the stock market and housing
market -- and indeed asset prices -- are rising again," he told the World
Economic Forum.  
     "The stock market has been a mirror of all this stuff. It's almost
uncanny," Kudlow said. 
     The Fed is purchasing USD60 billion of Treasury bills every month, in
addition to injecting billions of dollars of cash in the form of overnight and
term operations into the repo market, where banks and investors borrow cash for
short periods of time in exchange for high quality collateral.
     In September, repo borrowing costs spiked unexpectedly, prompting the Fed
to swing into action to bulk up bank reserves in order to preserve control over
short-term lending markets where monetary policy is implemented.
     Fed Chair Jay Powell has characterized the purchases as a purely technical
measure to support the effective implementation of monetary policy and having no
change to the stance of monetary policy. However Dallas Fed President Rob Kaplan
last week called the Fed's actions a "derivative of QE." 
     Kudlow also commented on the current stance of monetary policy, applauding
the Fed for taking back the policy rate hikes in 2018, but saying the Fed should
continue to cut. 
     "What are they worried about?" Kudlow asked.
     However, diverging from a view Trump has supported, Kudlow said negative
rates are ineffectual as a policy tool. "Negative rates are not helping banks
--MNI Washington Bureau; +1 202 371 2121; email: