Monetarist perspective affects normalisation forecasts – Chicago Fed paper

US Fed

A paper published by the Federal Reserve Bank of Chicago finds taking a monetarist perspective of the Fed’s balance sheet normalisation can affect projected outcomes.

Marcelo Veracierto, an economist at the Chicago Fed, observes that demand for cash is likely to fall as interest rates rise, which would tend to imply reserves balances at the Fed may fall more slowly than they otherwise would as quantitative easing is wound down. Since the Fed will pay out more interest on reserves as the policy

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