by David Kranzler
Investment Research Dynamics
Let me translate – We at The Fed have to pretend that we might one day stop QE, but we know in truth that that we can’t. The last time we tried tapping our foot lightly on the brake we blew up the markets. We are trapped. We know it. You know it. But we need to pretend otherwise. – Albert Edwards, Global Strategist and noted bear, in response the FOMC minutes released this past Wednesday in which some FOMC members said it might be “appropriate” to begin discussions on tapering QE in upcoming meetings
The rapid escalation of the Fed’s Reverse Repo activity has garnered a lot of attention and commentary. While no one outside of the Fed’s inner circle can say for sure what it going with this, it’s highly unlikely that the activity is a pre-cursor to and eventual tapering of the Fed’s money printing policy.
Repos and Reverse Repos (RRPs) traditionally are tools the Fed uses to implement its monetary policy in order to maintain its target Fed funds range, currently 0% to 0.25%. Interestingly, the Fed’s overnight RRPs activity has grown rapidly in volume since early March.