Citi Economist Mann: It Would Be 'Unfortunate' If Fed Moved to QE

The video discusses the process of monetary policy normalization and the large issuance of US Treasurys, highlighting the need for liquidity and the consequences of tight systems. It reviews research on banks' balance sheet elasticity and the repo market's size compared to the treasury market. The potential return to quantitative easing is considered, emphasizing the need for reasonable risk pricing and the Fed's role in navigating turbulent markets.

What is one of the main consequences of running a financial system very tightly?

• Decreased need for US Treasurys

• Price spikes

• Increased liquidity

• Price stability

According to the research, how has the repo market changed since before 2009?

• It has grown larger than the treasury market

• It is now only 23% of the size it was

• It has remained the same size

• It has completely disappeared

What is a potential action the Fed might take to address tight funding conditions?

• Reduce reserve balances

• Buy Treasury securities

• Sell Treasury securities

• Increase interest rates

What is a key challenge the Fed faces when considering a return to quantitative easing?

• Ensuring high interest rates

• Maintaining low inflation

• Reducing market liquidity

• Achieving reasonable risk pricing

What must the Fed consider when navigating turbulent markets?

• Public opinion

• Short-term gains

• Long-term economic consequences

• Immediate market reactions