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Strategies & Market Trends : ajtj's Post-Lobotomy Market Charts and Thoughts
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To: skier31 who wrote (73814)11/12/2022 1:31:34 PM
From: Lee Lichterman III1 Recommendation

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skier31

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I just have an excel spreadsheet that has the Fed balance sheet weekly numbers, the weekly TGA and then the RRP for Wednesday. (RRP is only overnight and doesn't change much from day to day so I just use the Wednesday level since I update on Wednesday nights when the other day is released).
On my spreadsheet, I have formula cells that track the change in the Fed balance for the week, month. Same for the TGA levels. Then a column for the Fed balance minus TGA minus RRP and a column for the weekly and monthly changes in that.
The Fed has been doing like they said they would and draining as scheduled. Like I said, the RRP doesn't change much so the wildcard has been the TGA.
Longer term, we should drop as the Fed's 4 trillion is drained but the TGA causes spikes and ripples.
If inflation really is coming down, then I could see everything just going like it has been. On the other hand if inflation continues and the TGA gas pedal keeps being pressed, I have to wonder if Powell will get pissed and accelerate QT to counter it. Instead of slowly draining over the next 3-4 years he calls Biden's bluff and starts draining 100 billion, then 125 billion, 150 billion until the TGA offset stops.
In my uneducated opinion, QT is more effective than interest rates for what he wants to do. QT directly affects the market and the wealth effect vs interest rates which are a blunt instrument.
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