Quantitative Tightening has now removed 35% of Treasury securities and 25% of MBS that pandemic QE had added.
By Wolf Richter for WOLF STREET.
Total assets on the Fed’s balance sheet dropped by $91 billion in February, to $7.54 trillion, the lowest since February 2021, according to the Fed’s weekly balance sheet today.
Since the end of QE in April 2022, the Fed has shed $1.43 trillion, as quantitative tightening continues on track.
During QT #1 between November 2017 and August 2019, the Fed’s total assets dropped by $688 billion, while inflation was below or at the Fed’s target (1.8% core PCE in August 2019), and the Fed was just trying to “normalize” its balance sheet.
Now inflation is hot, though it has come down a lot, driven by price drops in durable goods, and a plunge in energy prices. But services inflation didn’t cool off enough and now “core services” inflation had gone into a nasty acceleration.