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David's avatar

Some people are saying that the Fed may use QT to change interest rates instead of the fed funds rate. That is, given that inflation is cooling off there's no justification for higher rates. So they'll hold or lower it slightly. But they're still saying that they'll do QT. By selling long duration bonds, they can keep the 10-year yield higher for longer.

Why would they do this? Housing prices still has not come down that much. And that is contributing to the structural labor shortage. If inflation is low but housing is still in bubble territory, they have to try to deflate it. And the way to do it would be using QT.

I came across a twitter account that keeps track of the Fed's QT broken down by asset class and bond duration. I wished I bookmarked it because I can't find it anymore. Anybody know?

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DW's avatar

You can certainly make the argument that the Fed has been being the curve for pretty much every economic cycle for the past 30 years and probably longer. Can’t help but keep fighting the last war.

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