Fed Policy Near & Longer Term: Macro Matters

In this Macro Matters edition, host BI Chief U.S. Interest Rate Strategist Ira Jersey is joined by BI Chief US Economist Anna Wong and Interest Rate Associate Rates Strategist Angelo Manolatos. Jersey begins the show discussing the Federal Reserve's December meeting with Wong, with a focus on the press conference. Wong notes her view that the Federal Reserve may hike as early as March, with both she and Jersey agreeing an initial hike by June 2022 is very likely. Jersey notes that faster taper announcement hasn't roiled markets because he believes the January-March 2021 Treasury sell off was a "taperless tantrum." Wong also discusses her risk case scenarios for future Fed action.

In the Fun Fed Facts segment, Manolatos discusses the nuances of the Feds continued purchases and the affect on bank reserves and the Fed's reverse repurchase agreement facility. He notes that the RRP facility may fall in the near term as T-bills are issued reducing bank reserves as the Treasury General Account increases. Jersey and Manolatos discuss when, why, and how an early start to Fed balance sheet reduction may occur.