Gradual Print : The Fed's New Path Reshapes Market Outlook

While market attention is focused on every move of the Federal Reserve, a subtle adjustment is emerging. Economist Lyn Alden mentions the Fed entering “gradual print” mode : a progressive monetary creation, calibrated to nominal GDP growth. Far from the massive injections of 2020, this subtle strategy could disrupt interest rate expectations, redefine the balance of financial markets, and profoundly influence the evolution of cryptos like bitcoin.

A Monetary Strategy Now Guided by Nominal GDP

While the crypto market plunges into extreme fear, Lyn Alden states in an analysis : “the Fed has switched to gradual print mode”. She describes a paradigm shift in US monetary policy.

Rather than restarting a massive quantitative easing as in 2020, the Federal Reserve would adopt a moderate expansion of its balance sheet, aligned with nominal gross domestic product growth.

“The idea is to grow the Fed’s balance sheet at the same pace as nominal GDP”, explains the economist. This approach aims to maintain a certain level of liquidity in the markets without injecting too large a money supply at once.

This approach differs from the more aggressive policies implemented during previous crises. It relies on fine-tuning, intending to be consistent with a still resilient US economy and partially retreating inflation. The key elements of this strategy are as follows :

• No spectacular “big print” : the Fed does not plan a massive monetary stimulus in the short term ;

• Alignment of the balance sheet with nominal growth : the pace of balance sheet expansion will be proportional to GDP ;

• Liquidity stabilization : the goal is to maintain favorable market conditions without causing overheating ;

• A response to macroeconomic signals : the Fed seems to want to keep leeway to adjust its action based on data.

This tactical shift could profoundly change investors’ perception of the monetary trajectory for the coming quarters.

Between Political Uncertainties and Market Repositioning

Lyn Alden’s statement is not limited to a simple technical observation. It comes amid shifting market expectations. While in December nearly 90% of operators anticipated a rate cut by March, only 17.9% believe it now. This sharp sentiment reversal reflects the awareness of an extended status quo, reinforced by cautious signals sent by the Fed since the beginning of the year.

Moreover, the appointment of Kevin Warsh as Federal Reserve Chair adds an element of uncertainty. Indeed, Warsh could, according to some analysts, slow down monetary stimulus efforts. This climate of cautious waiting favors tactical repositioning in asset markets, including in the crypto sector.

Alden suggests that, in this context, savvy investors should favor “rare and quality assets”, which could include bitcoin or other cryptocurrencies seen as alternative stores of value.

In the face of this monetary inflection, markets remain alert. While the Fed proceeds cautiously, investors watch for signals. Google searches for bitcoin are exploding again, a sign of renewed interest fueled by uncertainty. It remains to be seen whether this trend will be the prelude to a new bullish cycle or prolonged volatility.