Key notes -
- Aftermath of great recession of 2008, US Federal Reserve announced (FED) its asset purchase programme also known as Quantitative Easing (QE). Since 2008, FED announced targeted QE as well as open ended programme.
- In 2014 the FED has completed its purchase programme and expressed its desire for tightening through raising interest rates from record low near zero.
- So far it has not declared to shrink the balance sheet which it will eventually at a later date. Clearing up the balance sheet would be more bullish for the US dollar and may not be good news for the stock market and especially bond market. Despite so some shrinkage appears in the sheet which could be due to expiring tenure of the securities held.
- FED has now ever more power to influence the value of the Dollar and bonds with staggering balance sheet size of $ 4 trillion.
- Despite the tightening, stock market is expected to head higher, riding on the positive economic growth.
- Concerns are there over the bond market liquidity but it is fair to expect that the FED will eventually manage to shrink the size of the base.
Posting Komentar