The Fed continued to modestly tighten monetary policy this week with a modest Treasury holding reduction of $32 billion. The Fed is approaching neutral monetary policy at this juncture but is not quite there. For commentators to suggest that Fed policy is restrictive is hogwash. Recall that CPI is still north of 6% (higher in actuality), and grew hotter in January versus December. The Fed has a great deal more work to do and I would focus on accelerating QT. Manipulating interest rates through the discount window is a fool’s errand.
- Treasuries: The Fed’s Treasury security holdings were reduced by $32.1 billion over the last week and by $71.1 billion on a rolling 4-week total basis.
- Agencies: The Fed’s Government Agency security holdings were reduced by $1.2 billion over the last week and by $16.4 billion on a rolling 4-week total basis.
- The Fed’s balance sheet holdings: https://www.newyorkfed.org/markets/soma-holdings
- Excel file: Our Excel file detailing the Fed’s holdings of Treasury and Agency securities: HERE.