Core Insights - The International Monetary Fund (IMF) has identified stablecoins as a significant risk to financial stability in its latest report, highlighting vulnerabilities in the global economy [1][8]. Group 1: Stablecoin Risks - The IMF's 2025 financial stability report mentions stablecoins 80 times, focusing on three main threats due to their rising adoption [4]. - A potential "stablecoin run" could lead to significant market impacts, particularly if major stablecoins like USDT and USDC are forced to liquidate reserves to meet redemption demands, which could influence the overall Treasury market [5][6]. - The report indicates that while a stablecoin run may not directly affect mortgage rates or corporate borrowing costs, the continued growth of stablecoins could introduce systemic risks [6][8]. Group 2: Monetary Policy Concerns - The adoption of dollar-denominated stablecoins raises concerns about currency substitution, especially in regions with weak macroeconomic fundamentals, which could undermine monetary policy tools [9]. - Central banks in the EU and U.K. are wary of threats to their monetary sovereignty, while the issue of digital dollarization is more pressing in the Global South [7][8].

both the supply and demand for for uh labor has declined declined quite sharply. So you know those two those two uh states of affairs for our two variables or two goal variables call for different monetary policy responses. So uh as they come more into balance I think the idea has been that that policy should move from being you know tight to some degree to being more neutral as those two things balance out.It's it is clear though that you know if we move too quickly then we may leave the inflation job unfi ...

Core Insights - The Federal Reserve's balance sheet plays a crucial role in monetary policy, especially during economic crises, as demonstrated during the COVID-19 pandemic [4][10][37] - The Fed's balance sheet totaled $6.5 trillion as of October 8, with significant components being Federal Reserve notes, reserves, and the Treasury General Account [6][8] - The Fed's asset purchases during the pandemic amounted to $4.6 trillion, aimed at stabilizing financial markets and supporting economic recovery [17][12][15] Balance Sheet Overview - The liability side of the Fed's balance sheet includes $2.4 trillion in physical currency, $3 trillion in reserves, and approximately $800 billion in the Treasury General Account [6][8] - The asset side consists mainly of $4.2 trillion in U.S. Treasury securities and $2.1 trillion in government-backed mortgage securities [9][30] - The Fed's balance sheet serves as a policy tool when the policy rate is constrained, allowing for large-scale asset purchases to support credit flow [10][12][37] Economic Response to COVID-19 - In response to the pandemic, the Fed established emergency liquidity facilities, providing over $200 billion in loans to restore market confidence [11][10] - Large-scale purchases of Treasury and agency securities were implemented to address market dysfunction, with purchases peaking at $120 billion per month by June 2020 [12][14][15] - The Fed maintained asset purchases until substantial progress was made towards employment and price stability goals, concluding purchases by March 2022 [15][16] Current Economic Outlook - The economic outlook indicates that employment and inflation conditions have not significantly changed since the last meeting, with a firm trajectory in economic activity [39][40] - Core PCE inflation was reported at 2.9% in August, with rising inflation expectations and potential risks to employment [41][42] - The Fed is closely monitoring indicators to inform decisions on the balance sheet and monetary policy, with a cautious approach to avoid market strains [28][29] Future Considerations - The Fed's ample reserves regime has proven effective in controlling policy rates and promoting financial stability, with plans to normalize the balance sheet gradually [25][27] - The composition of the Fed's securities portfolio will be discussed, aiming for a long-term focus on Treasury securities [30][31] - The Fed's ability to conduct monetary policy remains intact despite recent negative net income, as interest income from Treasury securities typically covers interest paid on reserves [32][34]

Steve Leeman of course has that for us. Steve. >> Hey Scott.Yeah. Boston Fed President Susan Collins, a voter this year making some doish comments saying it's prudent to normalize policy a bit further. She's also uh saying that uh even if they uh cut a little bit more that the uh Fed will still be mildly restrictive.I'm just looking for these uh these notes here. Uh Scott, she goes on to say that she believes that inflation is a uh uh is is really a matter of tariffs and she sees growth remaining solid desp ...

Monetary Policy and Labor Market - The current economic situation requires a careful balance between monetary policy responses to inflation and employment, with a shift from a tight to a more neutral stance as conditions stabilize [1][2][3] - Recent data indicates a significant softening in the labor market, suggesting that risks related to inflation and employment are becoming more balanced [3][6] - The break-even employment growth rate has decreased considerably, with estimates potentially falling below zero, indicating challenges in the labor market [4][5][6] Economic Indicators and Data Monitoring - The Federal Reserve is closely monitoring various labor market indicators, including state-level unemployment claims and private sector employment data, to gauge economic conditions [15][16] - The absence of timely government data could complicate the assessment of economic activity and labor market conditions, particularly for upcoming reports [17][20] - The Fed acknowledges the importance of alternative data sources but emphasizes that they should supplement, not replace, government data [16][17] Impact of AI and Technological Changes - The Federal Reserve is actively researching the implications of generative AI on productivity, labor markets, and economic stability, recognizing the early stages of understanding its full impact [21][23][24] - There are concerns about potential job losses and the need for greater education and skills to adapt to technological advancements, which the Fed cannot directly address [26][27] Interest Rates and Monetary Conditions - Current monetary conditions indicate abundant reserves, although there are signs of tightening in money market conditions, particularly in repo rates [29][30] - The Fed is committed to monitoring these conditions closely to ensure effective monetary policy implementation [29][30] Independence and Policy Decision-Making - The Federal Reserve emphasizes its commitment to maintaining independence in monetary policy decisions, focusing on data-driven approaches to serve the public interest [32][33] - Healthy debates within the FOMC are seen as essential for making informed decisions, especially in complex economic situations [36][39]

There really isn't a risk free path now, since it appears that inflation is continuing, is certainly is running above our target and appears to be continuing to increase quite gradually. But increase is still on the way up. So there's a risk there that that would that would lend to greater persistence.But now the labour market has demonstrated pretty significant downside risks as payroll jobs have declined. And you know, both the supply and demand for for labour has declined, declined quite sharply. So, you ...

There really isn't a risk free path now, since it appears that inflation is continuing, is certainly is running above our target and appears to be continuing to increase quite gradually. But increase is still on the way up. So there's a risk there that that would that would lend to greater persistence.But now the labour market has demonstrated pretty significant downside risks as payroll jobs have declined. And you know, both the supply and demand for for labour has declined, declined quite sharply. So, you ...

Monetary Policy Stance - The central bank's job on inflation is never done, implying a continuous monitoring and potential adjustment of monetary policy [1] - The central bank tamed inflation so far and is in a good place, but needs to anticipate any potential future events [1] - The central bank is deciding meeting by meeting and is data dependent, looking at models, empirical data, and applying judgment [3] - The central bank is trying to capture elements not easily captured by models [3] Uncertainty and Risk Factors - Uncertainty is a key factor that entrepreneurs, corporates, and the central bank must deal with [1] - Models cannot perfectly predict political development, geopolitical changes, and shifts in global order [2] - The central bank needs to understand how political development, geopolitical changes, and shifts in global order impact the world and monetary policy [2] Future Actions - The central bank cannot say how high the bar is for cutting interest rates or what would make them do that [2]

Core Viewpoint - The Federal Reserve may soon conclude its quantitative tightening (QT) efforts, which have been in place since 2022, as liquidity conditions in the financial system are being closely monitored [1][2]. Group 1: Quantitative Tightening (QT) Overview - QT aims to reduce the excessive liquidity added during the COVID-19 pandemic, with large-scale purchases of Treasury and mortgage bonds previously stabilizing markets [4]. - The Fed's balance sheet has decreased from around $9 trillion to $6.6 trillion since the initiation of QT, as bonds are allowed to mature without replacement [5]. - There are indications that liquidity conditions are tightening, evidenced by firming repo rates and temporary pressures on specific dates [3]. Group 2: Future Outlook and Monetary Policy - Powell indicated that the Fed's ample reserves regime has been effective for monetary policy implementation and financial stability [6]. - The extent to which the Fed can continue to shrink its holdings remains uncertain, but officials believe there is still sufficient liquidity to proceed with QT without disrupting money markets [5]. - Powell emphasized the importance of maintaining the Fed's interest-paying powers to ensure effective rate control and avoid significant market stress [6].

By Michael S. Derby (Reuters) -Federal Reserve Chair Jerome Powell said on Tuesday the end of the central bank’s long-running effort to shrink the size of its holdings, widely known as quantitative tightening, or QT, may be coming into view. Given the central bank’s long-running goal of leaving enough liquidity in the financial system to allow for firm control of short-term rates and normal money market volatility, Powell said “we may approach that point in coming months, and we are closely monitoring a ...