You Heard It Here First – “QT” Will Be The New Buzzphrase That Moves World Markets
You Heard It Here First – “QT” Will Be The New Buzzphrase That Moves World Markets – King World News
With everyone wondering what the next move will be by global central banks, “QT” is what is going to move world markets in the future and you heard it here first.
Peter Boockvar: First, After hearing Fed President Eric Rosengren yesterday afternoon again giving his support for allowing the balance sheet to “start the roll off now” as “we’re basically at our employment mandate and we’re basically at our inflation mandate. So ideally we don’t have to manipulate the yield curve” as he joins a growing line of Fed members that are supportive of reducing the size of their balance sheet, I realized one word has been missing from all of their comments on this important issue.
You Heard It Here First: “QT”
We’ve heard ‘shrinking/trimming the balance sheet’, allowing it to ‘roll off’, and ‘gradually removing accommodation’. We haven’t heard that this is another form of ‘tightening.’ I’m thus going to call it what it is, Quantitative Tightening, QT. No more shrinkage comments from me which I know you thought of that Seinfeld episode when you did.
While the fed funds futures market has reduced the odds of a June hike to about 50%, nothing tells me that the Fed wants to back off from moving again in June. I mean if they’re talking persistently about QT and that won’t start after more rate hikes, then we’ll get more rate hikes. Voting member Robert Kaplan today says because he expects a GDP pickup in Q2, he still sees two more hikes. But data dependency hasn’t gone away as he also said they can slow that down if the economy softens, and vice versa. Thus, 2 more hikes this year is his “baseline” scenario. By the way, Kaplan referred to QT as ‘balance sheet unwind.’
King World News note: “QT” is sure to become the new buzzphrase to describe what the Fed is really doing with monetary policy. Just remember that Peter Boockvar coined it.
And Now A Note From Art Cashin…
From legend Art Cashin: On this day (+1) in 753 B.C., the Ancient and Eternal City of Rome was founded. For the first quarter millennium of its existence it was ruled by kings – starting with Romulus (part of a notable brother act with a doggy home life) and ending with Tarquinius Superbus. (If your king sounded like an oversize van, wouldn’t you give up the monarchy?)