The Fed Begins Its Drawdown

Following up from an earlier post, the Federal Reserve has commenced reducing its holding of Treasury paper and Mortgage Backed Securities, as those little "tip downs" in the right of the chart show. There have been some alarmist posts about this on social media, but looking at this in context, you can see this isn't much of a drop.

This will begin to drain the liquidity provided by the Federal Reserve to deal with the COVID crisis. It will be interesting to watch the pace of reductions in holdings the Fed maintains going forward.

10/31/2022