Actions Before Words: Has the Fed Already Started Tapering?

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Actions Before Words: Has the Fed Already Started Tapering?

 

Latest weekly balance sheet data from major Central Banks show aggregate liquidity growth stabilising at 25% from recent 30%+ clip ( 3m ann.). The G4 equivalent (ex. China) stands at 29% from the recent 37% average. A sharp slowdown in Fed liquidity growth underlies the downturn. Admittedly, latest data show a slight recovery but this is down to a base effect. The main driver has been a jump in reverse repos. Importantly, the squeeze is not being offset by a simultaneous rundown in the Treasury General Account. Elsewhere, ECB liquidity growth continues to outpace all other majors but it too has stalled, and the Bank of Japan and Bank of England are gradually reining in.

 

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