The Composite Liquidity Indicator declined last week, bringing it to the bottom of the range it has been in since February. The index had dropped slightly below its 39 week moving average for the first time since February 2010 when the Fed was in its first QE pause.
The difference between now and then is that there was still more QE to come then. Now, the Fed has committed to the opposite course, which is to “normalize” its balance sheet. While I view that as a questionable proposition, it does seem more likely that this indicator will remain flat, than that the Fed would resume QE, which would push macroliquidity to new highs.
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