How will Powell drive the Fed car?

He may have one foot on the gas, the other on the brake

Quantitative Easing from November 2008 thru October 2014 bloated the Federal Reserve’s balance sheet by $4 trillion under Dr. Ben Bernanke and Dr. Janet Yellen. Yet, according to the St. Louis Federal Reserve Bank’s data, only 29 cents out of $1 of QE ever got to market. The Fed purchased bonds from financial institutions with the hope they would take the cash from the sale and make loans.

Yet, at the same time the Fed from 2006 when Bernanke came to the present imposed substantial increases in capital and liquidity regulation. This forced financial institutions to keep over 70% of the cash from bond sales on their books.

The Fed Funds rate has changed four times since 2015, since falling to 0.25% in December 2008. It now stands at 1.25%. Another 0.25% change appears imminent for December 2017.

So, will Jay Powell continue the same monetary policy as Bernanke and Yellen? Will Powell take an active part in influencing the future of the GSEs Fannie Mae and Freddie Mac, which he has identified publically as a concern? Or, like his predecessors, will he do nothing? Will Dodd-Frank-era regulations be kept in place by Powell? Will he consider more depositories as systemic risks, i.e. Navy Federal Credit Union?

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