⚡️ Summary of last night's speech by Federal Reserve Chairman Powell
🟢 Powell said that the Fed could soon halt its quantitative easing (QT) program, possibly in the coming months, to avoid a liquidity shortage as bank reserves are falling drastically.
The balance sheet of the Federal Reserve has decreased from nearly $9 trillion (during the COVID-19 era) to approximately $6 trillion today. He stated that the Federal Reserve will not return to the pre-pandemic level of $4 trillion, suggesting that liquidity levels will remain above those before COVID-19.
🟢 Regarding interest rates, Powell did not confirm a cut in the short term, but acknowledged that the risk of labor market weakness has increased, thus opening the possibility of a rate cut later in the year.
🟢 The market still expects two rate cuts this year, but Powell said that the Fed will act cautiously, as "there is no completely risk-free path" when it comes to balancing growth and inflation.
✨ Summary: Powell indicated that the Fed is approaching the end of its liquidity injection phase (QT) to avoid a money shortage in the system, but still maintains a neutral stance on interest rates, a sign that the tightening cycle is coming to an end and easing could come in the coming months.
