Following the global financial crisis, central banks took on a more prominent role in driving the U.S. economy. However, their influence soon became a political process where targets were influenced by political imperatives. Currently, the U.S. is in a delicate position as political stability is crucial before the November elections. Any actions taken by the central bank that could be perceived as interference in the election process are highly criticized.
Central bankers are hesitant to implement tough measures that could affect the economy leading up to the elections due to the sensitivity of the situation. The recent halt in excess money supply tightening, as indicated by the reverse repo chart, suggests a pause in actual money supply tightening by the Federal Reserve.
This hiatus in monetary policy has implications for markets, interest rates, and inflation. Investors concerned about a market crash may find some relief from this hiatus, while those expecting continued boom in the stock market may not be happy with this development.
It’s likely that sideways and choppy movement will continue in the stock market until after the election at which point there may be a shift in policy direction.
The Federal Reserve’s decision to halt excess money supply tightening reflects its efforts to maintain stability before upcoming elections. The recent halt suggests that monetary policy may remain stagnant until after November, with implications for investors and economic growth.
The pause in monetary policy also has potential consequences for markets and inflation. While some investors may see relief from this hiatus ahead of potential market crash fears, others may not be satisfied with this development if they expect continued booms in stock markets.
The current trend of sideways and choppy movement is likely to continue until after November when there may be a shift in policy direction from federal reserve.
