05/01/2024
FED DAY! And as expected, no change in the Fed Funds rate. However, The Fed announced plans for less "runoff", implementing one of their many tools to control the price and flow of money. Unless you love economics, you don't care much about balance sheet runoff normally so here is some background. Currently, the Fed allows up to $60 BILLION in Treasuries, and up to $35 BILLION in mortgage backed securities to be paid back each month. They have not been replacing that paid debt by purchasing new debt. This is called Quantitative Tightening and has been going on since June 2022. For perspective, the Fed's balance sheet was sitting at 9 TRILLION in June of 2022 and has declined to about 7.4 TRILLION as of last week. Their massive balance sheet doubled during COVID when the Fed believed inflation was "transitory". Today, we heard that starting June 1st, they will reduce the Treasury runoff to $25 BILLION. They will continue to let mortgage backed securities run off but will reinvest principal payments above that level into Treasuries. Hey Jerome, it's a start and the mortgage rates responded well! We will take it!! 🏠😜
