Mortgage rates could move sooner than many homebuyers expect but not because of interest-rate cuts — rather because of how the Federal Reserve manages itsbalance sheet. Federal Reserve Governor Stephen Miran said Feb. 10 that the central bank’s $6.6 trillion balance sheet needs to be smaller to reduce its footprint in financial markets and give monetary policymakers options in the event of a future economic crisis. It could also result in lower mortgage rates for the stagnated U.S. housing market. The R ...

Summary of Key Points from the Conference Call Company/Industry Focus - The focus is on the Federal Reserve and its impact on financial markets, particularly in light of the nomination of Kevin Warsh as Chair of the Federal Reserve [8][9]. Core Insights and Arguments - **Fed's Footprint**: Warsh argues that the Fed's footprint in financial markets has become excessively large, affecting both monetary and fiscal policy boundaries [8]. - **Balance Sheet Strategy**: While shrinking the Fed's balance sheet is possible, it requires reducing bank demand for reserves. A rapid shift in the Fed's footprint is unlikely [9][10]. - **Quantitative Tightening (QT)**: From 2022 to 2025, the Fed's balance sheet decreased from approximately $9 trillion to $6.6 trillion, primarily through passive QT, which has implications for reserve levels and short-term interest rates [10][11]. - **Reserve Management**: Any significant reduction in the Fed's balance sheet would necessitate a corresponding decrease in bank demand for reserves, which is currently elevated due to post-2008 liquidity regulations [17]. - **Treasury Coordination**: A smaller Treasury General Account (TGA) could allow the Fed to reduce its securities holdings without impacting reserve balances. The TGA has increased to nearly $1 trillion post-financial crisis and COVID [21][22]. - **Future Quantitative Easing (QE)**: The likelihood of future QE is constrained, with the Fed likely to only consider asset purchases under recessionary conditions that push policy rates to the effective lower bound [25]. Additional Important Content - **Communication Strategy**: Warsh critiques the Fed's communication strategy, suggesting that reduced communication could lead to higher market volatility and greater reliance on economic data rather than explicit FOMC signals [27]. - **Tariff Rates**: The effective tariff rate on US imports is currently around 11%, with potential fluctuations based on ongoing trade negotiations and legal challenges regarding tariffs [28][29][30]. - **US GDP Tracking**: The tracking estimate for 4Q GDP growth is at 1.6%, with private final domestic purchases tracking at 2.4% [43][44]. - **Retail Sales Forecast**: A forecast of a 0.5% month-over-month increase in retail sales for December, supported by auto sales and retail control, is noted [55]. This summary encapsulates the critical insights and data points discussed in the conference call, focusing on the Federal Reserve's strategies and their implications for the financial markets and broader economy.

February 6, 2026 09:00 AM GMT US Economics Weekly | North America Shining a spotlight on the Fed's footprint The nomination of Kevin Warsh as Chair of the Federal Reserve has brought renewed focus on the Fed's presence in financial markets. Key Takeaways Exhibit 1: The Treasury General Account has ballooned after the financial crisis and COVID. Cutting the TGA in half would allow the Fed to reduce its securities holdings by $500bn without altering reserve balances Treasury General Account ($bn) 96 98 00 02 ...

Good morning, i Michael McKee the international economics and policy correspondent for bloomberg. And we are here in atlanta. Welcome to all of our viewers and listeners around the world on bloomberg television and radio.We're speaking with the Atlanta Fed president Raphael Bostic, who is retiring at the end of this month. So this is sort of your exit exit interview. Mike, it's always good to see you.I want to ask you, as you travel around your district for the past year, what's the mood like among companie ...

You also write in the note that you've been tracking how Walsh's sentiment has changed since his time as a Fed governor during the great Financial Crisis 2006 to 2011, I believe. What did you find. Well, good to be with you.I found what you'd expect, which is he's been hawkish throughout his entire public career up until about the six months during which he's been interviewing for the Fed job, for a president who calls himself a low interest rate person. Shocking, I know. Isn't it like kind of baffling.I th ...

Core Viewpoint - The selection of Kevin Warsh as a potential Fed chair has shifted the focus from short-term interest rates to the Federal Reserve's $6.6 trillion balance sheet and its implications for market dynamics [5][6]. Group 1: Warsh's Critique of the Fed - Warsh has been a vocal critic of the Fed's balance sheet expansion, arguing that it has artificially depressed borrowing rates and encouraged excessive risk-taking in financial markets [4][9]. - He advocates for a reduction in the Fed's balance sheet and a redefinition of the relationship between the Fed and the Treasury, similar to the 1951 Treasury-Fed accord [10][11]. Group 2: Market Implications - A potential pullback by the Fed under Warsh's leadership could conflict with the administration's goal of lowering long-term borrowing costs, increasing pressure on the Treasury to manage market conditions [2]. - The Fed's balance sheet management is crucial for the functioning of major markets, affecting how financial institutions borrow and lend [3]. Group 3: Monetary Policy Framework - The Fed's current ample-reserves framework aims to ensure sufficient liquidity in the banking system, but a shift towards a smaller balance sheet could lead to increased borrowing costs and volatility [16][20]. - Analysts suggest that Warsh may have limited scope to implement significant policy changes due to the need for consensus within the Federal Open Market Committee [19]. Group 4: Future Considerations - The market remains cautious as traders await clearer signals from Warsh regarding his policy stance, indicating that the current status quo may persist until then [21].

Core Viewpoint - The nomination of Kevin Warsh for Fed Chair has led to significant market reactions, particularly in gold and silver, indicating a potential shift in monetary policy and investor sentiment towards inflation and quantitative easing [1][10]. Market Reactions - Gold and silver experienced extreme volatility, with silver prices collapsing by 39% from an all-time high of $121.78 per ounce to a low of about $75, before recovering slightly to $85, marking a 30% decline from the peak [10]. - Gold prices fell by 14% from $5,575 to an intraday low of $4,700, later stabilizing at $4,909, reflecting a 10% drop from the previous day [13]. - The dollar index (DXY) rose by 1.7% from a low of 95.55 to 97.15, indicating a strengthening dollar amidst the market turmoil [14]. Federal Reserve and Monetary Policy - Warsh has consistently criticized the Fed's quantitative easing (QE) policies and the size of its balance sheet, advocating for a reduction in the balance sheet in collaboration with the Treasury to avoid market disruptions [3][7]. - His views align with Treasury Secretary Bessent, who has also criticized the Fed for creating "perverse incentives" and failing to control inflation effectively [4]. - Warsh's historical stance as an inflation hawk suggests he may continue to advocate for tighter monetary policies, although the impact of technology on inflation remains uncertain [8][9]. Investment Sentiment - The recent market movements reflect a classic mania in silver, which had surged by 317% over the past nine months and 500% since early 2023, leading to profit-taking and subsequent price drops [11][12]. - Stocks showed minimal reaction to the Warsh nomination, with the S&P 500 and Nasdaq Composite experiencing slight declines, indicating that investors may be more focused on other factors such as inflation data and corporate earnings [17]. - The Treasury market remained largely unaffected by the nomination, with yields remaining stable [18]. Cryptocurrency Market - Cryptocurrencies, particularly Bitcoin and Ethereum, faced declines following the Warsh nomination, with Bitcoin dropping from $90,000 to around $84,000, reflecting a 31% decrease from its all-time high [19].

Group 1 - President Donald Trump has announced Kevin Warsh as his pick to lead the Federal Reserve, which has sparked a mixed reaction among investors and lawmakers [3][4][37] - The confirmation process for Warsh is expected to be contentious, with key Republican Senator Thom Tillis planning to block the nomination until the Department of Justice's inquiry into Jerome Powell is resolved [4][53] - Warsh's past as a Fed governor from 2006 to 2011 indicates a hawkish stance on monetary policy, particularly regarding inflation and interest rates [6][39] Group 2 - January saw record high-grade sales in the U.S., totaling over $208 billion, marking it as one of the busiest months ever for bond sales [26][27] - Morgan Stanley led the way in high-grade sales, with significant demand for offerings from companies like AT&T and IBM [27] - The bond market is currently experiencing tight credit spreads, which may not be reliable indicators of future market conditions [28][49] Group 3 - Warsh has expressed criticism of the Fed's current approach to monetary policy, particularly regarding quantitative easing and the size of the balance sheet [9][12][70] - There is uncertainty about how Warsh's views will align with the current Federal Open Market Committee, especially regarding interest rates and economic growth [21][62] - The market is cautious about the potential for Warsh to bring about significant changes to the Fed's balance sheet and interest rate policies [19][40][72]

Core Viewpoint - The appointment of Kevin Walsh to the Fed raises questions about his potential stance on interest rates, given his hawkish history during his previous tenure from 2006 to 2011, which contrasts with the current administration's preference for lower rates [2][3][4]. Market Reaction - Following the announcement of Walsh's appointment, there was an initial rise in yields and a sell-off in risk assets, indicating market confusion and uncertainty regarding his future policies [7][8]. - The market is currently pricing in an increased expectation for rate cuts this year, despite strong economic indicators such as GDP growth and elevated inflation [10][12][14]. Economic Indicators - The economy is reportedly running at a nominal GDP growth of 3.5% to 4%, with fiscal stimulus and easy financial conditions contributing to this growth [12]. - Recent PPI data suggests inflation remains elevated, which could impact future PCE readings and complicate the case for rate cuts [12][13].

Market Reaction to Kevin Worsh's Potential Nomination - The prediction market shows a slight increase in the probability of Kevin Worsh being nominated by President Trump, although there are still hurdles to overcome for confirmation [2][3] - Senator Tillis is opposing the nomination until investigations into Chairman Powell and Lisa Cook are resolved, indicating political challenges ahead [3] Economic Indicators and Inflation - The dollar is gaining strength, with the dollar index up about 0.5%, which may lead to weakness in physical commodities like silver and gold [5][6] - The Producer Price Index (PPI) increased by 0.5% month-on-month, which was higher than expected, indicating potential inflationary pressures [9][10] - Services inflation is driving the PPI increase, with a notable rise of 0.7% month-on-month, primarily due to a 1.7% increase in trading services margins [11][12] Earnings Reports and Market Sentiment - Recent tech earnings, particularly from Apple, Microsoft, and Meta, have shown mixed results, with concerns about supply chain issues and margin pressures affecting market sentiment [15][17] - Apple reported decent earnings but faces uncertainty regarding chip supply and pricing, which could impact future margins [17] - Microsoft’s capital expenditure and backlog from OpenAI raise concerns about revenue viability, while Meta is managing expenses through job cuts and strategic spending [18][19] Commodity Market Dynamics - The commodities market is experiencing significant volatility, particularly in metals, with silver down approximately 12% and gold down about 5% [21][22] - Liquidity issues in the silver futures market are contributing to erratic price movements, with low contract depth making it easier to push prices [23][26] - Technical indicators suggest a potential bearish divergence in silver, indicating a possible reversal, but past patterns show that such signals can be misleading [24][25]