The U.S. Federal Reserve, represented by Boston Fed President Susan Collins, has stated it is prepared to intervene in financial markets if necessary.
The U.S. Federal Reserve, represented by Boston Fed President Susan Collins, has stated it is prepared to intervene in financial markets if necessary, but only if liquidity issues arise or market conditions become disorderly. Despite concerns raised by recent market volatility, particularly following President Trump’s tariff announcements, Collins emphasized that current liquidity conditions remain stable. However, she made it clear that the central bank has tools at its disposal to address any market disruptions.
Collins noted that the Fed had previously acted quickly to stabilize markets, such as during the 2020 COVID-19 crisis, and would do so again if required. Although she acknowledged the broader market challenges, including rising yields in U.S. Treasuries, she underscored that there are no immediate liquidity concerns at this time. The Fed has maintained its position of monitoring the situation and has emphasized that its policy tools are flexible and varied, not limited to interest rate changes.
The yield on the 10-year U.S. Treasury has surged to 4.5%, marking a significant shift in the bond market. This movement, along with the uncertainty created by Trump’s tariff policy, has fueled concerns about potential instability in the $29 trillion Treasury market. As volatility continues, some market experts are speculating about a potential liquidity crunch, particularly in hedge funds that may be unwinding risky positions.
JPMorgan Chase CEO Jamie Dimon warned of the possibility of a blow-up in the Treasury market, emphasizing that if liquidity continues to shrink, it could affect other capital markets globally. He pointed out that without changes in regulatory measures, such as modifying the supplementary leverage ratio for banks holding Treasuries, the Fed may be forced to intervene once again. Dimon’s comments echoed concerns about a repeat of the 2020 crisis, when the Fed stepped in to stabilize the financial system.
Additionally, BlackRock’s Larry Fink weighed in on the broader economic situation, noting that the U.S. economy may already be in a recession or very close to it. Fink suggested that the ongoing uncertainty, partly fueled by trade policy and tariffs, will likely slow economic growth further. Despite these concerns, Fink does not believe the financial system is at risk of collapsing.
In the context of global liquidity, Bitcoin’s price has been heavily influenced by monetary liquidity conditions. Researchers have shown that fluctuations in liquidity have accounted for a significant portion of Bitcoin’s price movements, especially after the pandemic. According to Kingston University professors, liquidity has been one of the most important factors influencing Bitcoin’s price, surpassing even fundamental network metrics.
As the situation unfolds, market participants are watching closely to see if the Fed will need to step in to prevent further economic disruptions.
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