With inflation hotter than it expected, the Fed is trying to slow the pace at which it’s falling further behind.
A massive source of liquidity is approaching peter-out moment.
New York Fed’s Williams prepares markets for “technical adjustments” to the Fed’s “administered interest rates” to get a handle on this phenomenon.
“We want them to go back to” a normal interest rate environment.
Another market support gets pulled away and turned upside down.
“Inflationary pressures pose increasing price risks to Treasuries & stocks” as the Fed will react.
The majestic inflation overshoot has arrived.
It’s a crazy situation the Fed backed into as tsunami of liquidity goes haywire, banking system strains under $4 trillion in reserves, and General Treasury Account gets drawn down.
This is the first time I’ve seen Wall Street banks clamor for the Fed to back off QE. The Fed struggles to keep the liquidity it created from going haywire.
Margin debt is just the visible tip of the iceberg of leverage, and it reached the zoo-has-gone-nuts level.