Fed Took First Step Towards Tightening, Says JPM's Michele

The transcript discusses the expiration of the supplementary leverage ratio (SLR) exemption, which allowed banks to hold more Treasurys without additional capital. The non-extension may lead banks to sell Treasurys, affecting yields and financial conditions. The debate centers on whether the exemption helped absorb deposits and Treasurys. The discussion also touches on the potential tightening of monetary policy as the Fed gradually normalizes conditions, with a $1.9 trillion stimulus adding to the supply-demand balance.

What was the primary reason for not extending the supplementary leverage ratio exemption?

• To encourage banks to hold more capital

• To increase bank profits

• To reduce the number of Treasurys held by banks

• To decrease the interest rates

What is the main argument against the effectiveness of the SLR exemption?

• It caused a decrease in bank lending

• It led to higher inflation rates

• It increased the risk of bank failures

• It did not help in absorbing deposits and Treasurys

What could be a potential consequence of the SLR exemption's expiration on the financial system?

• Higher inflation rates

• Decreased government debt

• More deposits and Treasurys in the system

• Increased bank lending

How might the expiration of the SLR exemption affect financial conditions?

• It could cause a tightening in financial conditions

• It could lead to looser financial conditions

• It would lead to a decrease in interest rates

• It would have no impact on financial conditions

What is the Federal Reserve's role in the context of the SLR exemption expiration?

• To gradually tighten monetary policy

• To increase inflation

• To support the long-term interest rates

• To decrease government spending