Is the Fed actually going to do QT?

[importedsteak]

All it takes is one visit to the Fed website to see that the balance sheet has only increased its assets since announcing rate hikes and QT in November '21.

Are they ever going to start QT or are they lying about it? Can they even afford to with rising rates?

I would post the chart from the federal reserve board but can't insert links yet

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[o_e_l_e_o]

QT was only ever planned to start last month. If you go here, you will see a very slight downtrend over the last few weeks: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

From a peak of $8.965 trillion in April, the balance sheet is now sitting at $8.899 trillion. So they've clawed back $66 billion in the last two months, which sounds like a lot when reported in isolation, but isn't even 1% of their assets.

If you look back at the last QT starting at the end of 2017, it took them almost a year to ramp up to their maximum rate of around $40-50 billion a month.

So QT has started, and will accelerate over the next few months. Whether it actually continues as planned or they find some other reason to start up the money printers again, who knows.

[jackg]

Perhaps just mentioning it when inflation is high makes people/companies reconsider whether to keep spending or not too...

If inflation is intended to be reduced or money supply, it'll mean the fiat people are holding will start to become more valuable again anyway - so why spend now if there's a chance something will be done about it.

[o_e_l_e_o]

If inflation is intended to be reduced or money supply, it'll mean the fiat people are holding will start to become more valuable again anyway - so why spend now if there's a chance something will be done about it.

It doesn't mean that USD will suddenly start becoming more valuable. Rather it will just devalue less rapidly, with the goal to get back to a few percent a year rather than pushing ten percent a year as we are now. Holding fiat and hoping it becomes more valuable in the future is a fool's game, as history shows it only ever goes down long term. Unless you are earning more interest than the rate of inflation, which is near impossible in the current climate without taking significant risks, then you will lose money by waiting.

[Hydrogen]

If inflation is 8%.

And rates on loans are 0%.

Its a losing proposition for banks and loan markets by default.

They are forced to raise rates to match inflation. The same as every other aspect of the economy.

2022 being an election year. They will probably wait until after the elections to begin quantitative tightening in earnest.

Once the elections are over, I think we could see some significant changes made.