Economy

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91. Sprout Newsflash: The Fed Isn't Stopping QE!

Sun Nov 2, 2014, 10:22 AM

Nov 2014

11/2/14 via Sprout Money Blog
What has been expected for quite a while has now officially happened. The Federal Reserve stated that it would stop intervening on the market where it has been buying treasury bonds and mortgage-backed securities like there was no tomorrow anymore. The program started at a rate of $45B per month but was upscaled rather fast to $85B per month before being gradually scaled back since the beginning of this year.
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But wait, let’s not get carried away by the so-called ‘End of Quantitative Easing’ and have a closer look at this MBS purchase program. The Fed’s announcement to stop purchasing additional Mortgage-Backed Securities was just talking about NEW investments paid for by freshly printed money. It is the central bank’s intention to continue to reinvest the returns on its $1.7 trillion dollar Mortgage-Backed Securities portfolio back in the market in the foreseeable future.
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The real ‘credibility test’ for the Federal Reserve will no longer be in the official Quantitative Easing numbers but in the size of the balance sheet. We dare to bet the balance sheet of the Federal Reserve won’t shrink at all in the near future, and we expect the total balance sheet to remain at extremely elevated levels for the foreseeable future. The official Quantitative Easing has ended, but the Federal Reserve isn’t stopping its interventions as the MBS purchases will continue at the same pace. It only wants you to believe it did.

charts at link
http://www.zerohedge.com/news/2014-11-02/newsflash-fed-isnt-stopping-qe

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