Tomorrow and Wednesday mark another FOMC meeting. It is expected they will reduce asset purchases by another $10 billion per month to a new $35 billion monthly level ($85 billion monthly near the start of 2014.) We look forward to Chair Janet Yellen’s public testimony on hump day for clarification and guidance
If it has not happened by now it will not
Quantitative Easing aka QE or the purchase of fixed instruments by the FED to lower rates was a clever and handy tool when first used, but has overstayed its welcome. Rates have been low enough for long enough, we think it’s done all it can do!
The side effect of such purchases are a ballooning balance sheet (the FED creates money synthetically to buy the assets … not to worry there is a debit and credit entry for those accountant likes).
Here is a chart from our friends at JPMorgan of the afore mentioned balance sheet that also finds its way into our upcoming newsletter (that’s Trillions $$$) … getting pretty big!
The FED has a problem
In our coming newsletter we have an article concerning the FED’s ability to raise rates with so much extra money sloshing around in the system, which is a direct byproduct of the QE.
Janet … Go ahead and continue to slow those asset purchases (or even go more than $10 billion reduction) please! The US economy can handle it.
John A. Kvale, CFA, CFPwww.jkfinancialinc.com www.street-cents.com 8222 Douglas Ave #590 Dallas, TX 75225
Filed under: Interest Rates, Investing/Financial Planning Tagged: FED, FOMC, Janet Yellen, QE, QE Taper, Taper