UBS says the Fed is likely behind the curve in shrinking its balance sheet

cnbc.com:

The Federal Reserve is behind the curve when it comes to shrinking the balance sheet, according to UBS Global Wealth Management's Kelvin Tay. 

Fed Chairman Jerome Powell said Tuesday that he expects a series of interest rate hikes this year, along with other reductions in the extraordinary help the central bank has provided during the pandemic. 

«If you take a step backwards and you listen to what he said. He hasn't actually acknowledged that the Federal Reserve is actually behind the curve — but they certainly are,» Tay told CNBC's «Squawk Box Asia» on Wednesday. 

Tay noted U.S. stock markets are doing relatively well and corporate earnings in the second and third quarter of last year were also at «multi-decade highs.»

«And at this point in time they are still printing. So you must be wondering why they are still printing at this level, right?,» he said, adding key developments going forward will be how fast and how much the Fed shrinks its balance sheet.

Investors are awaiting Wednesday's key inflation data to assess the economic picture and the Fed's next move.

The U.S. central bank spooked investors last week after minutes of its December meeting signaled members were ready to tighten monetary policy more aggressively than previously expected.

It indicated it may be ready to start raising interest rates, dial back on its bond-buying program, and engage in high-level discussions about reducing holdings of Treasurys and mortgage-backed securities.

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