LynAlden on Nostr: The Fed put out a new annual report. These tend to get a lot less attention than ...
The Fed put out a new annual report. These tend to get a lot less attention than their twice-quarterly FOMC updates.
https://www.federalreserve.gov/publications/files/20250207_mprfullreport.pdfThey talked about when they would end quantitative tightening, and it's when the level of reserves to be somewhat above the level of what the FOMC judges to be ample reserves. The FOMC doesn't have a strong framework for what defines ample reserves, and it's mainly just "vibes based". The 12 people on the FOMC have certain vibes about whether reserves are ample enough or not.
Back in 2019, when they did quantitative tightening last time, they pierced below their ample reserve framework and had the repo spike in September, which caused them to suddenly pivot back toward slow QE.
I currently estimate that level to be reached in late 2025, but there are various things that can pull that forward or push it back, and we get a lot of data at the very end of each quarter to suggest how close or far we are from that.
I low-key find these reports so funny. It's 83 pages of decent economic analysis material, but ultimately the number of base monetary units in the system comes down to what 12 people decide is "somewhat" above "ample" reserves.
From the report:
"The Federal Reserve has continued the process of significantly reducing its holdings of Treasury and agency securities in a predictable manner. Beginning in June 2022, principal payments from securities held in the System Open Market Account have been reinvested only to the extent that they exceeded monthly caps. Under this policy, the Federal Reserve has reduced its securities holdings by $297 billion since June 2024, bringing the total reduction in securities holdings since the start of balance sheet reduction to about $2 trillion. The FOMC has stated that it intends to maintain securities holdings at amounts consistent with implementing monetary policy efficiently and effectively in its ample-reserves regime. To ensure a smooth transition, the FOMC slowed the pace of decline of its securities holdings in June 2024 and intends to stop reductions in its securities holdings when reserve balances are somewhat above the level that the FOMC judges to be consistent with ample reserves."
Published at
2025-02-10 22:06:16Event JSON
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"content": "\n\nThe Fed put out a new annual report. These tend to get a lot less attention than their twice-quarterly FOMC updates.\nhttps://www.federalreserve.gov/publications/files/20250207_mprfullreport.pdf\n\nThey talked about when they would end quantitative tightening, and it's when the level of reserves to be somewhat above the level of what the FOMC judges to be ample reserves. The FOMC doesn't have a strong framework for what defines ample reserves, and it's mainly just \"vibes based\". The 12 people on the FOMC have certain vibes about whether reserves are ample enough or not.\n\nBack in 2019, when they did quantitative tightening last time, they pierced below their ample reserve framework and had the repo spike in September, which caused them to suddenly pivot back toward slow QE.\n\nI currently estimate that level to be reached in late 2025, but there are various things that can pull that forward or push it back, and we get a lot of data at the very end of each quarter to suggest how close or far we are from that.\n\nI low-key find these reports so funny. It's 83 pages of decent economic analysis material, but ultimately the number of base monetary units in the system comes down to what 12 people decide is \"somewhat\" above \"ample\" reserves.\n\nFrom the report:\n\n\"The Federal Reserve has continued the process of significantly reducing its holdings of Treasury and agency securities in a predictable manner. Beginning in June 2022, principal payments from securities held in the System Open Market Account have been reinvested only to the extent that they exceeded monthly caps. Under this policy, the Federal Reserve has reduced its securities holdings by $297 billion since June 2024, bringing the total reduction in securities holdings since the start of balance sheet reduction to about $2 trillion. The FOMC has stated that it intends to maintain securities holdings at amounts consistent with implementing monetary policy efficiently and effectively in its ample-reserves regime. To ensure a smooth transition, the FOMC slowed the pace of decline of its securities holdings in June 2024 and intends to stop reductions in its securities holdings when reserve balances are somewhat above the level that the FOMC judges to be consistent with ample reserves.\"",
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