Why the Fed Ended Quantitative Tightening Now

Liz Ann Sonders and Kathy Jones discuss this week’s Federal Open Market Committee (FOMC) meeting and the latest interest rate cut. They also analyze some of the details of what is driving the Fed’s decisions in light of the government shutdown.

Next, Kathy Jones is joined by David Beckworth. Kathy and David discuss the complexities of the Federal Reserve's balance sheet, the broader implications of monetary policy, and the emerging landscape of stablecoins and central bank digital currencies (CBDCs). They discuss the challenges the Fed faces in managing its balance sheet, the potential impact of stablecoins on the financial system, and what these developments mean for investors. David outlines three potential steps the Fed could take to downsize the balance sheet: asset swaps, managing the Treasury General Account (TGA), and improving ceiling facilities. 

You can keep up with David Beckworth by following his podcast, Macro Musings, and his Substack, “Macroeconomic Policy Nexus.”

On Investing is an original podcast from Charles Schwab. For more on the show, visit schwab.com/OnInvesting. 

If you enjoy the show, please leave a rating or review on Apple Podcasts.

Important Disclosures

This material is intended for general informational and educational purposes only. This should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned are not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decisions.

All expressions of opinion are subject to change without notice in reaction to shifting market, economic or political conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Past performance is no guarantee of future results.

Investing involves risk, including loss of principal. 

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. Lower rated securities are subject to greater credit risk, default risk, and liquidity risk.

Diversification and asset allocation strategies do not ensure a profit and do not protect against losses in declining markets.

All names and market data shown above are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security.

Digital currencies are highly volatile and not backed by any central bank or government. Digital currencies lack many of the regulations and consumer protections that legal-tender currencies and regulated securities have. Due to the high level of risk, investors should view digital currencies as a purely speculative instrument.

Cryptocurrency-related products carry a substantial level of risk and are not suitable for all investors. Investments in cryptocurrencies are relatively new, highly speculative, and may be subject to extreme price volatility, illiquidity, and increased risk of loss, including your entire investment in the fund. Spot markets on which cryptocurrencies trade are relatively new and largely unregulated, and therefore, may be more exposed to fraud and security breaches than established, regulated exchanges for other financial assets or instruments. Some cryptocurrency-related products use futures contracts to attempt to duplicate the performance of an investment in cryptocurrency, which may result in unpredictable pricing, higher transaction costs, and performance that fails to track the price of the reference cryptocurrency as intended

The comments, views, and opinions expressed in the presentation are those of the speakers and do not necessarily represent the views of Charles Schwab. 

Indexes are unmanaged, do not incur management fees, costs, and expenses and cannot be invested in directly. 

Forecasts contained herein are for illustrative purposes only, may be based upon proprietary research and are developed through analysis of historical public data.

The policy analysis provided by Charles Schwab & Co., Inc., does not constitute and should not be interpreted as an endorsement of any political party.

(1025-36UZ)

Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.