Monetary Policy and Future QE Predictions

The Federal Reserve's current stance includes quantitative tightening, but there's speculation about a potential shift to quantitative easing (QE) in 2025. The podcast delves into the complexities of the Fed's balance sheet and the mechanics of lending, highlighting that increased bank reserves do not necessarily result in more lending. Historical evidence from periods before and after QE shows that household debt growth declined significantly post-QE compared to pre-QE periods, suggesting that stimulus measures do not always produce the expected outcomes in lending. This raises questions about whether future QE would address economic challenges or serve primarily as a psychological tool to influence market confidence.