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The Federal Reserve cut its balance sheet by $ 50 billion a month. disappointed, say economists.
In order to reduce its 4 trillion-dollar financial assets and mortgage-backed securities during the financial crisis, the Federal Reserve gave every $ 50 billion of maturing securities. York Fed show that investors believe the program will continue until mid-2020, when the Fed's balance sheet cut to about $ 3.5 trillion from the current $ 4 trillion.
Wall Street claims Fed to "tighten quantitative indicators" could end much earlier
Some Wall Street professionals link recent market turmoil to the Federal Reserve Balance Sheet program . Have fun, take your time. You're playing with fire because you're playing with the credit markets of the world and the US economy, "said David Kokot, co-founder of Cumberland Advisors, in an interview with Bloomberg radio on Tuesday.
Fed hopes to announce. the slower plan has grown since the Wall Street Journal published an article entitled "Fed Employees Estimate Earlier Than the Expected End of the Bond Portfolio."
But Seth Carpenter, an economist at UBS, said it was a mistake for investors to make that leap. "The Wall Street Journal does not mean that some believe that this means … we do not think the article signals an imminent adaptation or change to the runoff plan," he told customers in a note.
Bank of America economist Michel Meyer said the Fed would likely disappoint investors on Wednesday in the balance sheet.
"Powell is likely to stop signaling short-term balance," Meyer said.
Powell will talk to reporters after the two-day meeting of the Federal Open Market Committee.
Also during the meeting, the US central bank will probably stress that it will be patient to raise interest rates again.
Read: The Fed to emphasize patience and that means it will not move interest rate until at least June. In response, earlier this month Powell clarified that the Federal Reserve will not hesitate to adjust how quickly it will reduce its balance if the central bank perceives it as a cause of market turbulence.
Carpenter said Powell had to talk at the balance sheet press conference.
In particular, he said Powell had to calm the circle of his statement with the Fed's written policy that the central bank would only adjust the size and pace of the runoff if there was a threat of recession.
Carpenter said he believes the Federal Reserve will try to clarify that interest rate policy has been detained, and this will weaken balance-sheet pressure.