Jerome Powell Foresees Imminent Conclusion to Fed's Quantitative Tightening

Federal Reserve Chair Jerome Powell discusses the potential end of quantitative tightening, a process intended to reduce excessive market liquidity. Since 2022, QT has lowered Fed holdings from $9 trillion to $6.6 trillion. Powell indicates monitoring for sufficient liquidity to maintain market stability and control interest rates effectively.

Federal Reserve Chair Jerome Powell announced on Tuesday that the conclusion of the central bank's quantitative tightening (QT) efforts may be near. This approach seeks to reduce the Fed's asset holdings and has been in place since 2022, after the purchases made during the COVID-19 pandemic.

Addressing the National Association for Business Economics in Philadelphia, Powell noted that liquidity conditions are gradually tightening. He pointed out the rising repo rates as a sign, though temporary pressures on certain dates were noted. The goal remains to retain enough liquidity to ensure firm control of interest rates.

Since the onset of QT, the Fed's balance sheet has decreased from $9 trillion to $6.6 trillion. While the future extent of QT is unclear, Powell emphasized the importance of maintaining the Fed's interest-paying powers, which are crucial for effective rate control and economic stability.

(With inputs from agencies.)