TechFlow news, November 6 — According to Jinshi Data, Joseph Wang, who previously worked as a trader in the open market desk at the Federal Reserve Bank of New York and now runs the YouTube channel "The Fed Guy," believes that after three years of balance sheet contraction, the Fed is highly likely to restart balance sheet expansion before year-end.
He disagrees with some investors who argue that the Fed's move aims to prevent a collapse in risk asset prices, maintain low Treasury yields, or even avoid a liquidity crisis. Instead, he argues that if the Fed does not inject more liquidity into the system through securities purchases, it will lose control over short-term interest rates, meaning it would no longer be able to conduct monetary policy.
In Joseph Wang's view, strong repo demand and an expanding TGA account will force the Fed to expand its balance sheet by $300 billion to $500 billion annually.
