4 Jan 2024

LIQUIDITY MATTERS... From QE (Quantitative Easing) to QT (Quantitative Tightening) to QB (Quantitative Balancing) to QE Light

Some interesting views by Andreas Steno Larsen (Steno Research / Macrobond): 2024 Q1 -> While we are celebrating our inflation-progress, Powell and Yellen intend on handing out "Stealth QE / QE light" gifts to the banking system in Q1-2024. Steno Research view is that USD liquidity is likely going to increase massively in Q1 due to a series of technicalities surrounding the BTFP, ON RRP and TGA facilities. These three liquidity adding mechanisms will more than outweigh the QT program (running at a little less than $95bn a month on average), leaving a very benign liquidity picture ahead for Q1-2024. By their estimates, liquidity will increase with $8-900bn until end-March, which almost resembles a QE-light / stealth QE scenario. This will in case be one of the fastest liquidity additions on record, only outpaced during the early innings of the pandemic! If this happens, such a liquidity injection might be a massive tailwind for risk assets...


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