- The Fed must cooperate with the U.S. Treasury on fiscal goals, including reducing national debt and deficit, while remaining bound by Congressional spending mandates.
- US fiscal restraint is being observed amid a divided Congress.
Federal Reserve Policy Shifts Amid Congressional Spending and Dollar Devaluation
What happened
Beginning in 2020, Congress increased annual spending by trillions of dollars, prompting the Federal Reserve to create money to cover the massive deficits. The Federal Reserve also pushed interest rates near zero and purchased mortgage-backed securities from early 2020 through early 2022. This combination of actions led to dollar devaluation and stratospheric home prices.
From townhall.com
Why it matters
The massive government borrowing and money creation by the government devalued the dollar. The Federal Reserve's purchases of mortgage-backed securities incentivized lower interest rates and larger mortgages, which fueled the housing market boom.
US fiscal restraint is being observed amid a divided Congress, requiring the Federal Reserve to cooperate with the U.S. Treasury on fiscal goals while remaining bound by Congressional spending mandates.
From townhall.com