The fed is back to expanding its balance sheet after just 18 months of contracting it. The fed returning its balance sheet to pre-2008 was always a lie. I do not think the balance sheet will EVER go back to pre-crisis levels.
It increased the overnight REPO liquidity available from $75 billion to $120 billion and term REPO provision from $35 billion to $45 billion.
The monetary base, which is the sum of currency plus deposits held by depository institutions at Federal Reserve Banks, continues to contract. Given that excesses reserves keep leaking into the system this is expected.
M2 has been increasing more than usual for this time of year.
The level of growth in 13 week M2 NSA for week 28 was so rare, I decided to go back a few years to see how many times it occurred. Since 1997 it has only occurred once in 2011. It topped out at 16% growth in 2011. This marked the bottom of the US economy post the 2008-2009 recession.
Above all, the fed will remain accommodating.
Watching the FOMC members speak and their actions suggest they are going to just react to events. There is nothing new to this point but they have created so many new tools, I doubt they are keeping track of all of them. It reminds me of the spinning plate man. One day in the future, they will begin to topple. That day is just not here yet.
