Major central banks have reduced their balance sheets accumulated during Covid, with the Fed dropping from 37% of US GDP in 2021 to 21% by end of March 2026, totaling approximately $6.73 trillion. The ECB has fallen below 40% of eurozone GDP, the Bank of Japan to around 103%, and the Bank of England to 21% of British GDP. The US Treasury has taken over as the main source of market liquidity, with Scott Bessent purchasing up to $4 billion in long-term debt per operation and the TGA approaching $950 billion. Kevin Warsh, the new Fed chair, will deliver his inaugural speech at Jackson Hole on August 28, with markets watching closely whether the Fed or the Treasury will truly drive liquidity in 2027.
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