NEW YORK (Reuters) -The U.S. Federal Reserve may soon need to grow its balance sheet through bond purchases and could consider shortening the average duration of its debt holdings, Federal Reserve Bank of New York President John Williams said on Friday.
“The next step in our balance sheet strategy will be to assess when the level of reserves has reached ample” from the current state of “somewhat above ample”, Williams said in the text of a speech prepared for delivery at the European Central Bank Conference on Money Markets 2025 in Frankfurt.
When that happens, it will then be time to begin the process of gradual purchases of assets, Williams said.
“Based on recent sustained repo market pressures and other growing signs of reserves moving from abundant to ample, I expect that it will not be long before we reach ample reserves,” Williams added.
SHORTENING AVERAGE DURATION OF DEBT HOLDINGS
At last week’s Fed meeting, the Fed announced that December 1 would bring an effective halt to a three-year-old process to shrink bond holdings acquired as part of an effort to support the economy and financial system during the COVID-19 pandemic.
Williams also made the case for shortening the average duration of the Fed’s government debt holdings since it focused past purchases on long-term bonds and its average duration was now “very long”, much longer than the overall market.
“Having a somewhat neutral or close to neutral maturity structure in a central bank balance sheet relative to what’s out there in the market, it seems to make sense,” Williams said in response to a question. “We’re pretty long right now, very long in duration right now.”
From 2020, the Fed more than doubled the size of its overall holdings to a peak of $9 trillion on aggressive purchases of Treasury and mortgage bonds.
Since 2022, it has been allowing a set amount of those securities to mature and not be replaced with the aim of leaving enough liquidity in the financial system to retain firm control over the federal funds target rate range, its main lever to affect the economy, while at the same time allowing for normal money market volatility.
Recent signs of rising money market rates coupled with active use of Fed liquidity facilities indicated to the Fed it had gone far enough on shrinking holdings, hence its decision to hold the overall balance sheet steady at its current $6.6 trillion level.
Some analysts expect the Fed could start to expand holdings via bond purchases in the first quarter.
Williams cautioned that it’s tricky to know when the Fed has reached the level of reserves that will need it to start putting cash back into the system.
“I am closely monitoring a variety of market indicators related to the fed funds market, repo market, and payments to help assess the state of reserve demand conditions,” he said.
He cautioned that buying bonds to maintain the right amount of liquidity is not stimulus.
“Reserve management purchases will represent the natural next stage of the implementation of the (Federal Open Market Committee’s) ample reserves strategy and in no way represent a change in the underlying stance of monetary policy,” Williams said.
He added that Fed rate control tools like reverse repo and the Standing Repo Facility have been working well, and he expects to see active usage of the latter facility, which lends cash to eligible firms, going forward.
Trump says a tariff dividend of ‘at least’ $2,000 will be paid to most Americans
•President Donald Trump on Sunday announced that a $2,000 tariff dividend would be paid to Americans.
•In a post on Truth Social, Trump said the payments would be for all but “high income people.”
•The president also called critics of tariffs “fools” and said the US was taking in “trillions of dollars.”
President Donald Trump on Sunday announced that a dividend payment of “at least” $2,000 would be paid to most Americans from US tariff revenues.
In a post on Truth Social, he wrote: “We are taking in Trillions of Dollars and will soon begin paying down our ENORMOUS DEBT, $37 Trillion.”
“A dividend of at least $2000 a person (not including high income people!) will be paid to everyone.”
The Supreme Court is currently reviewing the legality of Trump’s sweeping tariffs, which he has justified under the International Emergency Economic Powers Act (IEEPA). Lower courts previously determined that many of the levies were unlawful.
The president had floated the idea of a $1,000 to $2,000 “distribution to the people” in an interview with One America News Network in October, touting tariff revenues he predicted would bring in over a trillion dollars a year.
I wonder if the payment, if it happens, will be tied to a digital I.D. or some form of government stable coin! I bet it will.
The Covid Stimmy payments seemed to keep many playing along. Didn’t Bush have a payout too, I think it was a tax refund of some sort? I don’t remember Obama or Clinton giving one out. Not sure how these payments help the economy or reduce the debt, except provide a few trips to the grocery store for those that use it wisely and after they spend it they still need money. I used most of my Covid stimmy on car repairs.
So really it was money given to the people who then distributed it to the corporations, who took out even more loans and created more debt.
Carrot anyone.
Only if it’s dangling!
The only thing keeping the Republicans in power will be a global war. Will it happen? 600 days left to find out. Stay tuned as time runs down
From Alice Bailey’s “The Externalization of the Heiraechy”:
“Thus a great and new movement is proceeding and a tremendously increased interplay and interaction
is taking place. This will go on until A.D. 2025. During the years intervening between now and then
very great changes will be seen taking place, and at the great General Assembly of the Hierarchy—held
as usual every century—in 2025 the date in all probability will be set for the first stage of the
externalisation of the Hierarchy. The present cycle (from now until that date) is called technically “The
Stage of the Forerunner”. It is preparatory in nature, testing in its methods, and intended to be
revelatory in its techniques and results. You can see therefore that Chohans, Masters, initiates, world
disciples, disciples and aspirants affiliated with the Hierarchy are all at this time passing through a
cycle of great activity”
Apparently we are now in the Implementation Stage.
When did she say this? She specifically said 2025? Thanks for sharing….
Original text was written in 1957 published by Lucis Trust ( formerly Lucifer Trust). Third paragraph on page 281.
For readers who may not be aware, Alice A. Baileys writings greatly influenced UN founding principles and spiritual guidance.
I believe it will. One only look at the race to re arm and the likes of Palantir and the projects they are involved in. All countries that are the main antaganists are aiming for the same date. War benefits the synagogue and killing whites on a massive scale is the icing on the cake!
From Bloomberg
American consumers are not happy campers. Sentiment across the country is close to the lowest it has ever been as rising inflation, rising unemployment, mass firings, a global trade war and now a record-breaking government shutdown have combined to make people less than cheery as the holidays approach.
The preliminary November sentiment index dropped 3.3 points to 50.3, just above a June 2022 reading of 50 that was the weakest in University of Michigan data back to 1978. The gauge was lower than all but one estimate in a Bloomberg survey of economists. A measure of current economic conditions slumped 6.3 points to a record low of 52.3 as anxiety mounted about the impact from the standoff in Washington.
Still, there was a bit of good news on Friday. Not this though—Americans’ perceptions of the job market also worsened last month. The brighter part, according to a monthly survey from the Federal Reserve Bank of New York, is that their expectations for inflation edged lower.
Unemployment expectations rose for a third straight month as consumers assigned an average 43% probability—the highest since April—to the likelihood the unemployment rate will be higher a year from now. But expectations for consumer price increases in the year ahead ticked down to 3.2% in October from 3.4% in September.
How will the FED will start buying assets again based on this information?
Expanding the repo window to start, since the reverse repo facility has been largely drained. It could announce any type of longer term window, then outright purchase schedule. The Fed mentioned concentrating on the shorter durations to help assuage overnight SOFR markets. I’m sure it will expand from there, branching out to more YCC.
Any type of manufactured crisis would suffice. It did during the Q3 2019 liquidity crisis.