After pumping extreme amounts of liquidity into markets, the U.S. Federal Reserve seems to be tapering back monetary easing policy via reverse repos (RRP). Following this week’s published minutes report from the Fed’s April monetary policy meeting, it seemed as though members of the central bank were prepared to discuss rolling back large-scale Treasury and mortgage-backed securities (MBS) purchases. This week, during a three-day period, the U.S. central bank removed $351 billion in liquidity according to reports.
Fed Removes $351 Billion in Liquidity from Market via Overnight RRP Operations
Last week, the Federal Reserve released the minutes’ transcript from the central bank’s April 27-28 policy meeting. The minutes’ transcript noted that a “number” of Fed board members have initiated the conversation about tapering back quantitative easing (QE) policy. Beyond initiating the conversation, the Fed said that it needed to see “substantial” progress in order to curb the massive Treasury note and MBS purchases. Reiterating this opinion, Fed Chair Jerome Powell told reporters it wasn’t the time to start the process of sunsetting QE purchases.
“No, it is not time yet. We have said we’ll let the public know when it is time to have that conversation, and we’ve said we’d do that well in advance of any actual decision to taper our asset purchases, and we will do so,” Powell stressed.
However, Powell’s commentary is contradictory to the actions the Fed participated in earlier this week. In fact, the Fed has begun tapering back QE without informing the general public in a loud fashion via mainstream media. After the myriad of press reports disclosing the statements from the recently published minutes transcript, the public has been led to believe the Fed is not even ready to talk about tapering back QE. That’s not the case according to data stemming from reverse repo (RRP) operations that saw $351 billion…