10 min readDuring the weekend following Silicon Valley Bank’s collapse, it became apparent that the bank run which drove SVB to insolvency was spreading, placing extreme liquidity pressures on a few regional lenders. Bank balance sheets remained fundamentally stable, although, the volume and speed of deposit outflows at some banks was overwhelming available liquid resources. Many banks…
14 min readMinutes from the December FOMC meeting indicated that some Federal Reserve officials wanted to begin discussing “slowing the pace” of securities runoffs on its balance sheet. Federal Reserve Chairman Jerome Powell confirmed after the January meeting that the Committee will begin formal conversations on the topic at its March meeting. The indication of an end…
16 min readCo-Authored by Pate Campbell, Analyst CFA Managing the Risks Posed by Tightening Financial Conditions DOWNLOAD REPORT Executive Summary Financial conditions are tightening, primarily as a byproduct of the Fed’s interest rate hiking cycle. This portends that households and businesses may be less supportive of economic growth than they have been in the post-Covid period. Households…
9 min readCould potential changes in the economy from the end of the Fed’s tightening cycle lead to a higher neutral rate? Introduction With the Federal Reserve System (the “Fed”) nearing the end of its tightening cycle, the question for investors has shifted to whether rates can truly remain “higher for longer”, to quote the current in-phrase…
7 min readThe History of the Fed’s Quantitative Tightening (QT) and its current standing The Fed’s history with Quantitative Tightening (QT) is both limited and perilous. Its only prior experience with Quantitative Tightening in 2018-2019 ended in disaster, when funding markets locked up in September 2019 due to a lack of available liquidity. This episode is infamously…
2 min readIn a widely expected move, the Federal Reserve raised the overnight lending rate today by 75 basis points for the 4th time in 4 meetings. Following the FOMC’s action, the rate now rests at the 3.75% to 4.00% range. The Fed’s 2022 tightening activity has been extraordinary for a central bank with a history of…
14 min readIntroduction With the 75-basis-point hike in the Fed funds rate on September 21st, Fed officials now peg their median forecast for the key policy rate in the 4.25%-4.50% range by the end of the year. The resulting rise in bond yields has been so breathtaking that the previous expectation that Fed funds would end the…
2 min readGiven their aggressive efforts to tame price pressures over the past few quarters, Chair Powell and the Federal Reserve were likely to have been very disappointed by the release of August’s Consumer Price Index. Despite a 2.25% increase in the overnight lending rate over just four meetings, the reading came in higher than expected with…
3 min readThe global economic landscape and cash investing have experienced sizeable market shifts in the past year due to the ongoing disruptions to supply chains, geopolitical tensions with the conflict in Ukraine, rising inflation across the globe and the Federal Reserve’s interest rate tightening cycle. Institutional cash investors will need to monitor all these ongoing disruptions…
2 min readThe Fed held its first meeting of 2022 last week and erased any lingering doubts, of which there were few, that it will raise the overnight lending rate when it next convenes in mid-March. In the press release following the meeting, the FOMC stated that “the Committee expects it will soon be appropriate to raise…