Fed vs Treasury

Like Alien vs Predator but for macro economics.

$1.5 trillion of balance sheet reduction vs $3.5 trillion in deficit spending. SOURCE: St. Louis Fed (FRED), Monthly Treasury Statement (MTS)

A lot has been said about the contrarian policy decisions made by the US Federal Reserve and US Treasury. On one hand the Fed is hiking interest rates and reducing their balance sheet and on the other hand the US Treasury has net deficit spent $3.5 trillion dollars since June 2022 (when the fed started tapering). I’ve created the chart above to easily convey what we already know: loose fiscal policy has supported the economy against monetary tightening.

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