Fed officials speak publicly and take an increasingly hawkish stance. In order to control inflation, the single rate hike is expected to rise from regular 25bp to 50bp, and even to 75bp this week, which can be described as a heavy blow. But actual action may be another matter.

Federal Reserve Brad said on Monday that he would not rule out a 75 basis point increase in interest rates and hoped to raise them to 3.5% by the end of the year. More hawkish than the previous position. Even so, Brad had a hard time answering a question:If you want to control inflation, why is the Fed's balance sheet still expanding?

In the week to April 13, the Fed's balance sheet rose by $27.9 billion to a new record of $8.965 trillion, an increase of about $3 billion from its March peak.

Peter Schiff, a veteran Wall Street prophet, said on social media: "although the Fed has been talking about fighting inflation and shrinking its balance sheet, it actually continues to create more inflation and expand its balance sheet!" "

At the end of March 2022, the Fed appears to have stopped QE. The Fed's balance sheet also fell from March 21 to 28, but rose in the following week, rising by nearly $28 billion last week.

According to the Federal Reserve, Taper began in March, and QE was officially stopped at the end of March. But judging from the data on the Fed's balance sheet, it seems that it has not given up easing and is still printing money to buy bonds. This is obviously not to control inflation, but to "get paid to put out the fire". Historically, when inflation has hit an all-time high, the Fed's balance sheet has never been seen expanding, except this time.

Even though balance sheet expansion has slowed to a "trickle", it continues to expand. Given inflation and all the talk about fighting rising prices, the public may think that the Fed is shrinking its balance sheet. This will certainly be the case if the Fed takes inflation seriously.

The question now is that inflation has reached its highest level in more than 40 years, so why did the Fed wait a while to shrink its chart? The answer is also simple:Because the Fed knows all too well that if the table shrinks immediately, the entire US economy will collapse!

This may be the toughest inflation war the Fed has ever faced. The balance sheet was $4.16 trillion in February 2020, up from a low of $3.76 trillion in September 2019. At that time, the Fed abandoned austerity policy because the stock market plummeted and the economy became unstable. This means that most of the Treasuries the Fed bought in the first round of quantitative easing after the 2008 financial crisis remain on its balance sheet today. Of course, after the COVID-19 outbreak, the Fed's balance sheet expanded by trillions of dollars.

Will the Fed succeed in shrinking its balance sheet this time? It seems unlikely that the Fed can't even finish the Taper.

The reality is this: while Fed officials are talking about fighting inflation, they are actually "delivering fuel" to inflation. The ever-expanding balance sheet means that the Fed is still implementing expansionary monetary policy. In short, so far, the fight against inflation has been more of the Fed's verbal expectation management than actual action.