United States Federal Reserve Chair Jerome Powell predicted on Thursday that the central bank balance sheet will be reduced by up to $95 billion by September. The Fed’s asset portfolio is currently being scaled down by half of that number. There is no clear connection between a concentrated economy and inflation, he told the US House of Representatives Financial Services Committee. The effects of increasing interest rates will be felt in financial conditions, economic demand, asset prices and the exchange rate, Powell explained. NN: people hear what they want to hear. The Fed announced it will double the rate will reduce the balance sheet. That means liquidity will be drying up at a even faster rate. Bottom line this is the death knoll for the stock market,,,,,, Let me help you understand this. In the past few years the FED has purchased half 50% of the total government issued. it has also bought most of the home mortgages paper issued and a huge hunk of corporate debt. The feds balance sheet stands as of June 14, 2022, a eye popping 8.93 trillion U.S. The Federal Reserve increased 1000% since 2007, when it stood at roughly 0.9 trillion U.S. dollar. This year the FED will reduce its balance sheet buy a trillion dollars. Net when you consider they were increasing their balance sheet by a trillion dollars a year will be 2 trillion less liquidity they last year. The markets from housing to bonds to corporate debt markets will be devastated.
