The Federal Reserve is about to announce what it wants to do with its $4 trillion in assets. Here's why Trump and Wall Street are concerned.
Jerome Powell, chairman of the U.S. Federal Reserve, listens during a Financial Stability Oversight Council meeting at the Treasury Department in Washington on March 6, 2019. . By Heather Long Heather Long Economics correspondent Email Bio Follow March 20 at 2:14 PM If you pay any attention to the Federal Reserve, you probably watch whether the central bank is lowering interest rates or raising interest rates .
They see it kind of like loose-fitting jeans, a comfortably large pool of money that helps keep operations flowing easily in the financial sector. Basically, they don’t want the Fed to trade in comfy jeans for tight ones, which might constrict the economy. Wall Street guess wanted the balance sheet to end up being around $3.5 trillion and that is about where it appears it will end up. Many on Wall Street like Kevin Logan, chief U.S. economist at HSBC Bank also expected the Fed would stop shrinking the balance sheet by the end of September and that is exactly what the Fed announced Wednesday.Why does President Trump care about the Fed balance sheet?
As the Fed slims down its balance sheet, it has the side effect of lowering the level of bank reserves held at the central bank. That worries some people because the reserves held at the Fed are the easiest to access and safest money in the banking system, so there’s good reason to keep that level high. That’s why Trump tweeted about wanting to keep as much “liquidity” as possible.
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