On the Margin Newsletter: The Fed balance sheet is bottoming

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The Fed pivot no one’s talking about

Despite the action-packed June FOMC meeting last week, there was very little talk about the major shift in balance sheet policy by the Fed that began this month.

After running the balance sheet up from $4 trillion to $8.9 trillion during the COVID-era quantitative easing campaign, the Fed has been employing quantitative tightening since 2022 to decrease the size of its balance sheet and lower the total amount of bank reserves within the system.

There are two ways QT can work: “soft” or…

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