Gavekal Capital: Total Fed Assets In Step With Our Projections Through January

Tuesday, February 4, 2014

Total Fed Assets In Step With Our Projections Through January

We have seen research that suggests that for each $800 billion in Fed asset purchases it equates to approximately a 100 bps reduction in the fed funds rate. Based on the tapering plan the fed set out in December ($10 billion in fewer purchases approximately every six weeks) the Fed will buy approximately $460 billion in assets 2014. This would imply a simulated federal funds rate of -4.3% at the end of 2014. So far, as this chart shows, the Fed is right on pace though January.

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