First post here so please go easy on me. I wanted to start a discussion comparing the two Fed tightening cycles listed in the post title.
Equity markets sold off in late 2018 while the first attempt of QT was in full effect from 2016 until about September 2019 along side a hiking cycle that looks to have ended June 2019 and then rate cuts commenced. The markets rallied from a bottom of December 2018 until Feb 2020.
It is now 2022 and we are in the middle of a Fed hiking cycle soon approaching a restrictive Fed funds rate and the highest amount of monthly QT just started from the Fed balance sheet all to fight high inflation.
What were the main catalysts that fueled the sell off in 2018? Was it more related with the tariffs or was it tighter fiscal monetary policy weighing in on the markets? What exactly made the Fed pause QT and what made them cut rates?
Between rate increases and balance sheet runoffs, is one or the other more effective to combat the current levels of inflation?
Or is this just an apples to oranges comparison of tightening cycles to fight historic levels of inflation vs the Fed’s 1st attempt to unload assets from the balance sheet? I apologize if these questions have previously been posted. Thank you for your time.
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