After the 2008 financial crisis, it took five years of quantitative easing (QE) for the Fed’s balance sheet to grow $1.8 trillion. This year, once the pandemic began, it took less than five months.
With interest rates once again at the zero lower bound, the Fed is tapping every tool it has to ease policy and prevent deflation. Its assets are ballooning at unprecedented speed. It has, for the first time ever, entered markets for corporate bonds. Aiming to boost inflation expectations, Fed Chair Jerome Powell last month broke with longstanding Fed messaging by saying he would tolerate inflation over two percent “for some time.” However in my opinion, with $8T from the Federal Reserve + another $7 from the Federal government already in the company in such a short amount of time, U.S will for sure have 7 to 8% inflation in 2022-2024 time frame.