This week, following the FOMC meeting, the Federal Reserve left the federal funds rate unchanged – at a range of 5.25 to 5.5 percent. No surprise there.
The real dirt, however, was buried in the implementation note. That’s where the Fed revealed that starting June 1, it will taper its monthly balance sheet reduction of U.S. Treasuries from $60 billion to $25 billion. In other words, $105 billion less Treasuries will need to be issued in Q3.
The Fed, in essence, is trying to put a lid on rising interest rates. Perhaps this buys the Fed, and the overextended financial system, a little time in an election year. But with persistently high consumer price inflation and a balance sheet that’s still over $7.4 trillion, this simmering pot must to boil over.
For there are factors at play which are much greater than Fed monetary policy. If you understand the mechanics of what’s going on, you’ll be well ahead of 99 percent of your peers – and even many of the so-called professionals. Where to begin? Continue reading