On July 10th, at an event jointly hosted by the Dallas Fed and the World Affairs Council of Dallas/Fort Worth, Fed Governor Christopher Waller gave a nuts-and-bolts discussion about the inner workings of the Federal Reserve.
Drawing on his almost
Governor Waller Gets Candid About Fed's Balance Sheet Mismatch And Losses
Summary
- Fed Governor Waller openly acknowledged the Fed's balance sheet maturity mismatch and ongoing losses, a rare and candid admission from a central bank official.
- Waller projects the Fed will halt QT when bank reserves hit $2.7 trillion, with the balance sheet settling at $5.8 trillion, extending QT into 2029.
- Political attacks on Chair Powell threaten Fed independence, with the administration seeking grounds to remove him and undermine central bank autonomy.
- If Powell leaves, markets may react negatively: the dollar could weaken, yield curves may steepen, and stocks face heightened risk due to lost Fed credibility.
Michael Gray has devoted his career to following the capital markets and managing fixed income assets. He founded Gray Capital Management LLC and before that was Head of Taxable Fixed Income at Fidelity Investments. Michael has an MBA in Finance from Wharton and a BA in Economics from Union College.
Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.