The US Federal Reserve is prepared to operate a huge arsenal of monetary policy tools to quickly deteriorate financial and economic conditions, but it will do it only if the liquidity dries or the markets become disordered, said the best central banker.
In an interview with Financial timesPresident Boston Fed, Susan Collins, said that the central bank “would be absolutely prepared” to the backstop markets if needed.
Source: Walter Bloomberg
Although it is generally understood that the Fed is always prepared for quick action to stop market chaos, Collins’s attention appears on the heels of selling assets in the field of shares and bonds that aroused concerns about the health of the American financial system.
In general, the Fed “sees no concerns related to liquidity,” said Collins. If this was to change, decision -makers would have “tools to solve problems related to the functioning of markets or liquidity,” she said.
Collins Fed in a photo in a December interview for Bloomberg. Source: Bloomberg Television
Collins’ comments for investors can have additional weight because it is Voting member This year’s Federal Committee of the Open Market (FOMC) -12-person panel responsible for setting interest rates.
While Collins and its FOMC members voted in favor of maintaining interest rates at their March meeting, the greatest waso was the soothing of the central bank in the scope of quantitative exacerbation by reducing the restriction of the purchase to Treasurys by 80%.
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The Fed moves markets
The federal reserve policy exerts gravitational attraction of global markets through the liquidity of the American dollar or the ease with which dollars can be used for investment and transactions. The liquidity has a enormous impact on the prices of digital assets, including Bitcoin (BTC).
This was additionally confirmed by the academic paper Kingston University of London professors Jinsha Zhao and J Miao, who stated that the liquidity of the dollar ” [a] A significant impact on the price of bitcoins. “
The compound strengthened after the Covid-19 pandemic, with liquidity conditions for over 65% of bitcoin prices.
“After a pandemic, [monetary liquidity] It is the most important determinant of the Bitcoin price, even exceeding the basic measures of the Bitcoin network, “said the scientists.
Makro Lyn Alden analyst came to a similar conclusion when she called Bitcoin a “global liquidity barometer” in September article.
Alden drew attention to the relationship between the Bitcoin price and the global M2 or a wide measure of supply of money in the main global economies.
Bitcoin trades in the same direction as global liquidity in over 83% of cases. Source: Lyn Alden
According to CointeLgraph at the beginning of March, the augment in global liquidity and the reflecting business cycle had historically sturdy predictive powers for the Bitcoin price. Trends in the field of liquidity and business cycle suggest that the BTC price can be ready to recover in the second quarter.
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