Urgent urgent urgent 💡
New: 🇺🇸 The Federal Reserve has officially ended its quantitative tightening policy.
What does this mean:
Quantitative tightening is the process by which the Federal Reserve allowed a specified amount of Treasury and mortgage-backed securities to mature each month without reinvesting the proceeds, thereby reducing its balance sheet and withdrawing liquidity (cash) from the banking system.
The end of quantitative tightening signals a shift in monetary policy from a restrictive stance to a more neutral position.
Increased liquidity: The main effect is the cessation of the continuous draining of cash from the banking system, leading to improved overall market liquidity.
Reason for the change: The Federal Reserve ended the quantitative tightening policy primarily to address signs of stress and increasing volatility in financial markets, as bank reserves fell to concerning levels.
Market impact: This move creates a more favorable environment for risky assets such as stocks and corporate bonds, as investors may move away from safer, lower-yielding investments.
Future policy: The Federal Reserve is likely to resort to "Reserve Management Purchases" (RMPs) in the coming months to help maintain liquidity without resorting to full quantitative easing (QE), which is a bolder form of monetary stimulus.
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