I agree 100%. The whole idea of QE was to offset the constraint posed by ELB. To the extent that fiscal more than fully offset that constraint in the post COVID cycle, there was no need to do any QE except to finance the fiscal spending.
Curve inversion normally occurs towards the end of a tightening cycle. Given a 9T balance sheet, the current inversion is not signaling anything meaningful. Your idea of a reverse twist is quite clever. Cleveland Fed has been pushing QT as a precursor to hiking FF. LIFO principle would suggest that its a sensible sequencing. However, its too late for the Fed to have this luxury. Their best bet at a soft landing (however rwmote) is to let both ends of the curve work for them.
In any case, if as you mention, they have to stop QT in 2023 and find themselves with 7-8T balance sheet, QE as an easing tool will disappear. Atleast it should!
I agree 100%. The whole idea of QE was to offset the constraint posed by ELB. To the extent that fiscal more than fully offset that constraint in the post COVID cycle, there was no need to do any QE except to finance the fiscal spending.
Curve inversion normally occurs towards the end of a tightening cycle. Given a 9T balance sheet, the current inversion is not signaling anything meaningful. Your idea of a reverse twist is quite clever. Cleveland Fed has been pushing QT as a precursor to hiking FF. LIFO principle would suggest that its a sensible sequencing. However, its too late for the Fed to have this luxury. Their best bet at a soft landing (however rwmote) is to let both ends of the curve work for them.
In any case, if as you mention, they have to stop QT in 2023 and find themselves with 7-8T balance sheet, QE as an easing tool will disappear. Atleast it should!