Daily Management Review

Did US Fed just announced QE4?


The Federal Reserve factually announced the launch of QE4, although it is still trying to name the operations to increase the balance somehow differently.

Federalreserve via flickr
Federalreserve via flickr
Fed Chairman Jerome Powell said that the regulator will resume regular open market operations after a five-year hiatus.

According to Powell, the regulator will thus replenish the reserves of banks. However, it is worth recalling that at one time Mr. Powell called the process of quantitative tightening the removal of reserves from the system. Judging by his logic, the addition of reserves is nothing more than quantitative easing.

In addition, it seems that the situation on the repo market, which has developed in recent weeks, was just a smokescreen. The real reason the Fed is returning to buying assets is the colossal placement of new bonds.

It seems that traditional buyers - Japan and China - do not want or cannot buy such a volume of treasuries, so the new government debt will be bought at the expense of the Fed.

JP Morgan bankers compared the volume of upcoming operations with what was during the QE1 program. The volumes are almost identical, so any claims that this will not be a quantitative easing program look rather strange.

source: zerohedge.com