Sooner or later, America’s financial system could seize up

Masterly inactivityMBSMBS is back in vogue at the Federal Reserve’s rate-setting committee. After its meeting on June 14th it kept its benchmark rate on hold, rather than raising it, for the first time since January 2022. One or two more rate rises may lie ahead: Jerome Powell, the Fed’s chairman, suggested so in his post-meeting press conference, and that is what investors expect. Gradually, though, the main debate among Fed watchers has shifted from how high the rate will go to how long it will stay there before being cut.That is a knotty problem, made knottier by the fact that core prices in America (excluding volatile food and energy) rose by 5.3% in the year to May. It is also not the only one facing Mr Powell and his colleagues. They have spent the past year steadily shrinking the Fed’s huge stock of Treasuries and mortgage-backed securities (), the face value of which has fallen from $8.5trn to $7.7trn. Each month the Fed allows up to $60bn-worth of Treasuries, and $35bn of , to mature without reinvesting the proceeds. Now it must decide when to stop.