Represents 39% of GDP
CLICK HERE for the NY Fed Survey.
The NY Fed is out with comments about the Fed's system open market account or SOMA, saying
- The SOMA could grow to $9 trillion by 2023 or 39% of GDP
- After that point, the path of portfolio will depend on the choices made regarding the portfolio as the FOMC normalizes the stance of monetary policy
- Balance sheet projections largely reflects open market desks surveys of primary dealers and market participants
- New York Fed reserve balance is projected to peak at $6.2 trillion by the end of 2022 but then began to steadily decline
- Survey shows treasury, MBS purchases will continue at current pace through 2021, but gradually go to zero by end of 2022
- Responses show reinvestment of treasuries, MBS continues to Q4 2025
- Median effective Fed funds rate seen a steady at 12.5 basis points through Q3 of 2023, and rising to just over 2% by end of 2026
- Median expectations for Fed funds rate to reach 2.25% in the longer view
- 10 year treasury yield seen rising 22.5% in the longer run. 30 year fixed rate mortgage rising to 4.1%
The Fed has been adamant about not surprising the market. The taper expectations from the market is for there not to be a taper until 2022. If the Fed is to change that idea, they would need to explicitly say it.
