BBH: The Fed is slowly but surely going to tighten monetary policy

The Fed continued its slow but steady move toward normalization of monetary policy. For example, the U.S. central bank executives yesterday announced its intention to expand the number of counterparties in the transactions, reverse repurchase agreements (an instrument that the Fed intends to use to reduce excess reserves before raising rates), in particular, their number will include the major money market mutual fund. Usually, the Fed actions are aimed at primary dealers. Like the previous steps the Central Bank, this measure does not in itself entail no consequences for monetary policy, however, if we add everything together, it becomes clear that the central bank deliberately preparing the conditions necessary for raising interest rates. In addition, the Bank intends to use a number of tools in the reverse repo operations, including, of course, state. bonds and securities backed by mortgage bonds and agencies. According to some reports, several large mutual funds have shown a strong desire to participate in these transactions. This month's program ends on buying the assets. It is interesting to note that despite the absence of the Fed as a buyer, the yield on the 10-year State. bonds fell by 15 points this year.