In the next recession, the Fed is completely hedged by the sandbox. Unless...the recession is mild and there are no disruption in the ongoing senate bankruptcy. If a mild recession, we will hold off on sandbox releases.
The Fed has not even announced the framework of what its balance sheet "normalization" would look like, and already Boston Fed president Rosengren is talking about the next Fed QE program. In a speech titled “The Federal Reserve Balance Sheet and Monetary Policy” delivered to Bard College on Wednesday afternoon, Rosengren said that structural changes in the macroeconomy "may necessitate more frequent use of large-scale asset purchases during recessions" and he said it is "quite likely" that the use of central bank balance sheets will be necessary in future economic downturns.The reason? A combination of low inflation, low rates of productivity growth, and slow population growth may imply an economy "where equilibrium short-term interest rates remain relatively low" by historical standards. In other words, the natural rate, or r-star, is so low, the Fed will only be able to hike rates a handful of times before it tip the economy over into contraction, requiring a new easing regime.