Good morning. The minutes from the Fed’s December meeting were released yesterday, and they gave more evidence that the Fed’s governors are jumpy about inflation . The market barely responded. A cautious Fed seems to be priced in already. Email us: [email protected] and [email protected]. Unhedged’s writers thoroughly enjoy Martin Sandbu’s Free Lunch newsletter, which just added a Sunday edition, written by Tej Parikh. We think Unhedged’s readers will enjoy it, too. Sign up here.
There is no “right place” to stop QT — the Fed is feeling its way, or “learning by doing”, in Ben Bernanke’s words. Ideally, QT stops at a point where banks reserves have normalised, but there is still enough liquidity in the system for markets to function smoothly.