Submitted by Taps Coogan on the 30th of January 2019 to The Sounding Line.
Evenflow Macro’s Marc Sumerlin recently spoke with Rick Santelli to discuss the possibility of a slowdown in the Fed’s balance sheet reduction, a so-called ‘tapering of the taper.’ Both seem to think that the Fed’s balance sheet reduction may end when the balance sheet reaches roughly $3.5 trillion, implying that the Fed may be roughly halfway done with the taper. At the current rate of tapering ($50 billion a month), the Fed would reach $3.5 trillion in less than 12 months.
“First day of a two day Fed meeting and it all seems to be about cementing the notion that they are going to go slower, rate hikes will be shallower, and lots of talk about ‘T3,’ tapering the taper…”
“…The balance sheet is just a whisker over $4 trillion. The securities holdings are about $3.86 trillion. The notion that somewhere around $3.5 (or) $3.6 could be enough, is what I hear in the whispers in the marketplace.”
“I’ve done the math myself and you get down to somewhere at $3.25 trillion at the lowest, but probably around $3.5 trillion on the balance sheet. So, I think that’s a pretty good guess of where it is. I think part of the issue on the balance is they need to be a little better in their communication on it. You saw Esther George say ‘How can we say that there’s no effect on QT but then we should believe that if we have a recession we go into QE that it’s going to be very powerful.'”
There is more to the interview, so enjoy it above.
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