Is It Enough? Michael Howell on Money Market Turbulence, Standing Repo Facility, and Why Fed Balance Sheet Expansion Is Inevitable

Jack Farley interviews Michael Howell about the Federal Reserve's policy change to stop quantitative tightening (QT) and its implications for market liquidity. Howell discusses the inevitability of the Fed's decision due to shortages in U.S. money markets and repo market strains, while also addressing the potential restart of quantitative easing (QE) in 2026. They debate whether the Fed's actions qualify as true QE, considering credit and maturity transformations, and explore the impact of Treasury bill issuance on money supply and inflation. Howell expresses caution despite the Fed's actions, citing insufficient liquidity and potential problems in repo markets, and touches on the future composition of the FOMC and its potential impact on monetary policy. The conversation also covers the influence of shadow banking, the role of repo markets, and the global liquidity cycle, with a focus on China's liquidity injections and the potential for a shift in market dynamics.