The Fed’s forthcoming QT program has yet to ramp, thus the monetary tightening process has yet to really begin in our view.
Tomorrow at 4:30pm ET we will get a picture of where the Fed’s balance sheet sits. After shrinking modestly during the month of May, the Fed continues to grow its balance sheet (below). In fact, YTD the Fed’s balance sheet has increased from $8.8 trillion to $8.9 trillion. QT fun has yet to begin. Our view is that QT will make a greater impact toward mitigating price inflation than will increasing the Fed Funds Rate.