The Fed contracts
The Fed’s acquisition of large amounts of Fannie and Freddie’s debt was a notable success of that strategy, as it lowered their borrowing rates and thus lowered mortgage rates. But, as the graph below shows, the Fed has engaged in quantitative tightening over the past month, reducing its borrowing and reducing its holdings of higher-yielding investments. The line labed “Other assets” measures that type of investment. So far, no explanation for the Fed’s announcements of moving in an expansionary direction while actually contracting.