Macroeconomic & Geopolitical

Will the Fed’s QT Trigger a Financial Crisis as Growth Slows?

July 2022 – 3 min read

The outlook for Quantitative Tightening will likely depend on the Fed's commitment to the tool, and, at the first sign of trouble, it may be quick to course correct.

Expect the Fed to proceed with extreme caution on Quantitative Tightening (QT). There are risks around finding new marginal buyers for government debt, especially buyers who care far more for valuation and return. But, the overall market impact should prove limited as issuance shrinks. If signs of instability start developing the Fed will likely put it on the back burner. Rising recessionary fears as demand contracts will likely be a larger driver of nominal interest rates.

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Christian Floro

Associate Director

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