. The days of making easy money during QE are over. The year-over-year growth rate of the M2 measure of money supply in the U.S. neared 30 per cent post-COVID-19 because of the massive monetary and fiscal policy response to the pandemic. But it did not drive goods and servicesThis advertisement has not loaded yet, but your article continues below.Because of the big gap between economic and money supply growth, this excess liquidity showed up in inflated asset prices.
The nominal cap amount of runoff is US$95 billion per month and it will be continuing on autopilot for the foreseeable future . We do not expect a repeat of September 2019 when money markets were spooked by the decline in the aggregate size of the Fed’s balance sheet to US$3.7 trillion from US$4.4 trillion at the beginning of 2018, and the central bank had to begin purchasing Treasuries again. The Fed has since put programs in place that should help ease a similar dislocation in money markets.