US Fed policy: Normalisation begins
- A transparent forward-guidance strategy.
- A slow schedule for unwinding – initially by only about $7.5 billion per month of US Treasury notes and $4.9 billion of mortgage-backed securities (MBS). This will eventually rise to about $37.7 billion per month and $24.9 billion per month, respectively, compared with average daily trading volume of almost $625 billion in the Treasury market and almost $250 billion in the MBS market.
- An intent not to sell securities but simply to decrease the amount it reinvests from maturing securities.
- A likelihood of settling on an optimal balance-sheet size that is significantly higher than precrisis levels (we expect it to be in the $3.7–$4.4 trillion range, up from about $995 billion).
Figures cited are in Australian dollars, at September 2017 exchange rates.
26 September 2017
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