📉🏦 The Federal Reserve between financial discipline and intervention in times of crisis
Stephen Miran, a member of the Board of Governors of the Federal Reserve, stated that the central bank's balance sheet should be smaller in the long term, a clear indication of support for quantitative tightening and financial discipline.
But the most important message was more balanced 👇
Miran confirmed that reducing the balance sheet does not mean abandoning strong intervention during crises, emphasizing that large-scale asset purchases (QE) will remain an option if the economy faces a severe crisis threatening financial stability.
🔍 Why is this statement important for the markets?
It reflects the flexibility of monetary policy instead of rigidity.
It reassures the markets that the Fed still possesses strong intervention tools.
It clarifies that the current tightening is not permanent, but cyclical and adapts to conditions.
Summary:
The Federal Reserve seeks a more efficient budget in normal times, but it will not hesitate to expand aggressively when necessary. This approach enhances confidence in the financial system's ability to absorb shocks and keeps investors on alert for any major economic shift.