“Fed drains monetary punchbowl but others replenish” — “private sector activity is replacing Fed stimulus as market driver”
• Monetary policy may be more accommodative today than it was when the Fed was expanding its QE program. The combination of a near zero short-term interest rate world, a recent steepening in the yield curve, early signs suggesting money velocity has finally turned higher and recent confidence-boosting actions by the Fed are, at a minimum, keeping monetary policy quite stimulative”.
• The Fed’s taper is already paying off” — “bank lending rose sharply in Jan and Feb” — “The banking system’s balance sheet will go through a powerful, growth-oriented transformation as it adjusts to the taper. Rather than looking for safe long-term loans to replace the Fed’s bond purchases, banks will be looking for short-term loans with solid yields to make up for the Fed’s absence. These are precisely the type of loans that are made to new and small businesses to finance inventory, accounts receivable, equipment and, indirectly, job growth”