Fast Take
Knowledge from FRED exhibits that the Federal Reserve’s steadiness sheet has elevated by $2.6 billion to $7.2 trillion. Regardless of the Fed’s ongoing quantitative tightening, there have been intermittent intervals of stagnation or progress within the steadiness sheet. Nonetheless, the long-term pattern stays downward.
The steadiness sheet peaked at $9.0 trillion within the second quarter of 2022, indicating a roughly 22% discount over the previous two years. Pre-pandemic, the steadiness sheet stood at $4.2 trillion, reflecting an over 50% enhance since then.
As the tip of the rate-hiking cycle approaches, hypothesis concerning the Federal Reserve’s first fee reduce is mounting. This hypothesis has intensified following the Shopper Worth Index (CPI) inflation print on July 11, which recorded a deflationary headline fee month-over-month at -0.1%. The lower in CPI inflation suggests a cooling economic system, probably prompting the Fed to think about a fee reduce. The steadiness sheet and inflation traits will likely be essential in shaping the Fed’s financial coverage choices within the coming months.
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