An Increasingly Uncertain Fed Not so Sure About Unwinding QE Anymore, Either

via CNBC:

  • In recent months, the benchmark fed funds rate has drifted in line with the interest on excess reserves, which the Fed uses as a guidepost for the funds level.
  • Fed Chairman Jerome Powell said the committee may have to approve a 20 basis point hike in the IOER rate to try to hold back the funds rate.

The Federal Reserve is continuing to examine its program to reduce its balance sheet and likely will have to make another tweak at the December meeting to keep it running smoothly.

In a process begun in October 2017, the bank is decreasing the size of its bond portfolio, which grew to more than $4.5 trillion as part of an effort to drive down mortgage rates and lift economic growth.

The Fed is doing that by allowing $50 billion in proceeds from the portfolio to run off each month, while reinvesting the rest.

 

Watch Fed chair’s Jerome Powell’s full speech on the US economy from CNBC.

 

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