Is the Federal Reserve really tightening? So far, not so much

TIPSWatch/David Enna/8-7-2022

“On March 23, 2022, the Federal Reserve’s balance sheet topped off at $8.96 trillion, an increase of 282% over the total of $2.44 trillion in January 2011. Since March, the Fed has begun to raise interest rates and to allow Treasurys and mortgage-backed securities to mature without reinvestment. Now, as of Aug. 2, 2022, the balance sheet stands at $8.87 trillion, a reduction of just 1% in four months. I repeat, a reduction of 1% after an increase of 282% over a stretch of 11 years.”

USAGOLD note: The tightening thus far has been more in the rhetoric than in the actual policy execution. Some on Wall Street have bought into the illusion of tightening as a reality (or a reality to arrive in the not-too-distant future), others aren’t buying into it at all which makes for a very confusing set of market circumstances for the average investor. Enna provides a detailed assessment of where the Fed stands now, what it needs to do tame inflation, and why it is having difficulty getting the job done. “Inflation,” he concludes, “will continue to be a problem. And inflation protection continues to make sense as part of your asset allocation.”

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