United States:
Fed Starts Experiment of Letting $8.9 Trillion Portfolio Shrink
“The Federal Reserve is about to start shrinking its $8.9 trillion balance sheet, deploying a second tool along side higher interest rates to curb inflation, though officials don’t know just how effective it will be. After doubling in size through asset purchases in the first two years of the pandemic, the balance sheet will be reduced at a pace that’s almost twice as fast as after the last financial crisis. While the process officially commences on Wednesday, the first US Treasury securities won’t run off until $15 billion mature on June 15.”
Europe:
Half-Point ECB Hike Needed After Inflation Record, Holzmann Says
“The latest all-time high for euro-zone inflation strengthens the case for the European Central Bank to lift interest rates by a half-point in July, according to Governing Council member Robert Holzmann. The Austrian central bank chief, a top ECB hawk who’d already been urging a hike of that size, said a lack of “decisive action” now would risk expectations about the path for consumer prices becoming unanchored, requiring tougher measures later on that could trigger a recession.”
Asia:
China Orders $120 Billion Credit Line for Infrastructure Growth
“Beijing ordered state-owned policy banks to set up an 800 billion yuan ($120 billion) line of credit for infrastructure projects as it leans on construction to stimulate an economy battered by coronavirus lockdowns. The announcement, made at a State Council meeting chaired by Premier Li Keqiang, could help finance a significant chunk of infrastructure costs this year.”
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