Courtesy of Pam Martens
By Pam Martens and Russ Martens: June 18, 2021 ~
Apparently, the mega banks on Wall Street thought that the Fed was never going to take away the punch bowl. And now the Fed has indicated that it’s thinking about thinking about doing just that.
By taking away the punch bowl we mean trimming back its $80 billion in monthly purchases of Treasury securities and $40 billion in agency Mortgage-Backed Securities. And, at some point, actually starting to hike interest rates again.
Fed Chair Jerome Powel made clear during his press conference on Wednesday that trimming the $120 billion in bond purchases monthly is now very much part of the FOMC discussions. Powell said this in answer to a question about when that trimming might start:
“So I expect that we’ll be able to say more about timing as we see more data. Basically, there’s not a lot of more light I can shed on that. But you can think of this meeting that we had as the talking about talking about meeting, if you like. And I now suggest that we retire that term, which has served its purpose well, I think. So, [FOMC] Committee participants were of the view that since we adopted that guidance in December, the economy has clearly made progress, although we are still a ways from our goal of substantial further progress. Participants expect continued progress ahead toward that objective. And assuming that is the case, it will be appropriate to consider announcing a plan for reducing our asset purchases at a future meeting. So, at coming meetings, the Committee will continue to assess the economy’s progress toward our goals, and we’ll give advance notice before announcing any decision.”
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