The Fed Has Done Enough

The banking crisis might be equivalent to a 100bps hike in the federal funds rate. We are just guessing, but financial conditions have surely tightened a lot as a result of the SVB earthquake and its aftershocks. Further hikes in the federal funds rate are no longer necessary to get it into restrictive territory as Fed officials have been aiming to do since they started the latest monetary policy tightening cycle a year ago.

If the Fed stops raising interest rates, will it also stop it's quantitative tightening? It might have to at least stop reducing its holdings of mortgage-backed securities (chart).