The Federal Reserve's balance sheet has decreased to its lowest level since February 2021, showing a reduction of $1.5 trillion from its peak in April 2022. This reduction raises questions about the amount of Quantitative Tightening (QT) necessary to reverse the extensive Quantitative Easing (QE) from March 2020 to April 2022, which totals $3.4 trillion. In the UK, Andrew Bailey commented on the economic repercussions of Truss' government, highlighting the significant cost of the Bank of England's QE programme. The unwinding of this programme is projected to result in losses of £191 billion by 2031, equating to about 7.5% of GDP. Despite these losses, there have been net gains from the QE programme, with positive cash flows to the Treasury totaling £113 billion. However, current estimates suggest net losses of around £60 billion, exacerbated by potential inflation and occurring during a period of fiscal stress.
The stuff about profits is misleading. 1) There are net losses of around £60bn according to estimates and larger if inflation comes back. 2) The losses currently accruing are at a time of fiscal stress. The government eats the losses at the pleasure of the Bank. https://t.co/R4fqUo8PZb
Losses on QT. Sure. "To date, positive cash flows from the APF to the Treasury have totalled £113 billion." There were profits on QE too. https://t.co/pxxHmLUUR2 And? https://t.co/LnK5DtDPso
"Stephen Cecchetti and Jens Hilscher calculate that losses from unwinding the Bank of England’s Quantitative Easing (QE) programme will amount to some £191 billion between now and 2031. That amounts to around 7.5 per cent of GDP" Read that again. https://t.co/6BfaRau1nl
“Andrew Bailey said that Truss’ government had damaged the country’s reputation. Yet while Truss’s tax cuts were set to cost the Treasury £30 billion in 2023 alone the losses from the Bank’s QE programme cost £40 billion and will cost £40 billion again this year.” https://t.co/guF0Lw7nlP
The Fed's balance sheet is now at its lowest level since February 2021, down $1.5 trillion from its peak in April 2022. How much more QT is needed to unwind the massive QE from March 2020- April 2022? $3.4 trillion. https://t.co/HFD44r9xfm