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Quick update on the Quantitative Tightening that wasn't.
First, here's our take on the Fed from our US economist Thomas Costerg. perspectives.pictet.com/wp-content/upl… (1/n)
First, here's our take on the Fed from our US economist Thomas Costerg. perspectives.pictet.com/wp-content/upl… (1/n)
Our interpretation of Powell’s comments on the balance sheet is that a decision could be made this summer, for the auto-pilot reduction to be suspended, potentially from Q4 2019. This will make a big difference since the Fed is the main/only driver of QT. (2/n) 
Now looking at total assets of the Fed, ECB, BoJ in USD terms, central bank liquidity was unlikely to shrink much in 2019-20 anyway. A Fed 'plateau' would likely translate into another expansion in central bank liquidity, albeit at a slower pace. (3/n)
The full picture is more complicated when other factors are factored in, including other balance sheet items, ECB & PBoC liquidity measures, or the US Treasury general account with the Fed, but they are all likely to boost excess liquidity in the short to longer term. (4/4)
