(Jan 30): Jerome Powell’s hawkish pivot makes it clear that a key crutch of support for the global economy is going to be pulled away sooner than financial markets had been betting. The Bank of Canada last week signalled it could tighten monetary policy in coming weeks having ended so-called quantitative easing in October. “If central bank rates alone were increasing [rates], but quantitative easing was staying in place, this would provide at least some liquidity support to asset prices,” said Freya Beamish, head of macro research at TS Lombard. While that’s a consolation, it hasn’t stopped financial markets from turning skittish about the pending withdrawal of liquidity. QT could be announced in July or even sooner and the central bank could eventually sell some of the mortgage-backed securities it owns, according to economists.
