quick take
- The market outlook has completely changed in recent weeks due to bank failures in the US and EU.
- The market is now pricing in a significant rate cut rather than further hikes, to around 3.75-4% by the end of 2023.
- The market suggests a greater than 90% chance that the Fed will complete the rate hike, but four rate cuts are priced in for the rest of the year.
- The Federal Reserve’s balance sheet has expanded for the past two weeks in a row. About $100 billion was added to the balance sheet this week.
- Two-thirds of the quantitative tightening was undone within weeks.
- That’s the third-largest rate of change in the Fed balance sheet after COVID-19 and 2008.
A post-rate cut is now expected as the Federal Reserve balance sheet grows, first appearing on CryptoSlate.
