Monday, January 23, 2017

Yellen Hints At Equivalent Of Five Rate Hikes

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*The murmur of Fed officials is building about letting the Fed balance sheets finally "run off".

*These are the assets built up from quantitative easing.

*Letting these assets run off will allow markets to trade which will allow volatility and risk back into markets.

Fed Chair Janet Yellen joined the chorus of Fed officials to let QE ("Quantitative Easing") assets "run-off." Currently as their $4T+ portfolio of bonds and mortgage securities mature they are reinvesting the money into the market. That has been a constant "artificial" support to markets. When this huge buyer steps out of the way markets (NYSEARCA:SPY) will be able to "trade" increasing volatility, risk and downside.
Please go try and figure out what Fed Chair ("FC") Yellen just said on QE.
Here's what she said on Thursday:
"The downward pressure on longer-term interest rates that the Fed's asset holdings exert is expected to diminish over time--a development that amounts to a "passive" removal of monetary policy accommodation. Other things being equal, this factor argues for a more gradual approach to raising short-term rates."
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