Fed Policy Tightening Leaves Balance Sheet No Longer an Economic Booster, Says Jefferies Strategist

The U.S. Federal Reserve’s monetary stance remains restrictive, with its balance sheet no longer acting as a catalyst for growth, according to Jefferies strategist David Zervos.Speaking via Jinshi Report, Zervos said the Fed’s balance sheet — once viewed as an “accelerator” for the economy during periods of quantitative easing — has lost its stimulative effect under current policy conditions.Fed Policy StanceZervos emphasized that the Federal Reserve’s policy is “quite tight”, reflecting a cautious approach to inflation and liquidity.The Fed continues its balance sheet reduction strategy, known as quantitative tightening (QT), which removes liquidity from the system.Markets are now focusing on whether weakening U.S. inflation data will shift expectations for potential interest rate cuts later in the year.Market ImplicationsThe strategist’s remarks underscore investor concerns that without the Fed’s balance sheet expansion, economic momentum may slow further. Risk assets, particularly equities and cryptocurrencies, remain sensitive to signals from both interest rate decisions and the Fed’s balance sheet management.