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Data: Federal Reserve via FRED, projection from Deutsche Bank; Chart: Andrew Witherspoon/Axios

The Fed's outlook is relatively pessimistic about the future, based on recent speeches and communications from top policymakers and likely augurs a massive expansion of the central bank's balance sheet in coming years, Deutsche Bank chief U.S. economist Matthew Luzzetti says in a new research note.

What's happening: "We find that the Fed will need to provide significant accommodation — roughly equal to a fed funds rate of -5% — and that [quantitative easing] and forward guidance could be insufficient."

What it means: Given the Fed's reluctance to introduce negative nominal interest rates and the deteriorating state of the economy, Luzzetti argues the Fed will need to expand its balance sheet by up to an additional $12 trillion in short order.

  • "[T]he more optimistic scenario would take nearly four years to achieve, while the more pessimistic view would take more than eight years."

Watch this space: The analysis relies on "optimistic" assumptions, including "that the Fed’s unconventional tools are as potent today, with yields at record low levels and the market pricing a negative fed funds rate in the coming quarters, as they were several years ago when yields and risk premia were much higher and the market actually anticipated future rate hikes."

  • So, the balance sheet could rise by much more.

Go deeper

Federal Reserve expands lending program for small businesses

Federal Reserve Chairman Jerome Powell at a news conference in 2019. Photo: Eric Baradat/AFP via Getty Images

The Federal Reserve said on Friday it would again lower the minimum loan size for its pandemic-era small business program.

Details: Businesses and nonprofits will be able to borrow a minimum of $100,000 from the facility, down from $250,000 — a move that might attract smaller businesses that don't need as hefty of a loan. Since the program launched earlier this year, the minimum loan size has been reduced twice.

Dion Rabouin, author of Markets
4 mins ago - Economy & Business

The Fed could be firing up economic stimulus in disguise

Federal Reserve governor Lael Brainard at a "Fed Listens" event. Photo: Eric Baradat / AFP via Getty Images.

Even as global growth expectations increase and governments pile on fiscal spending measures central bankers are quietly restarting recession-era bond-buying programs.

Driving the news: Comments Tuesday from Fed governor Lael Brainard suggest the Fed may be jumping onboard the global monetary policy rethink and restarting a program used following the 2008 global financial crisis.

Democrats' hypocrisy moment

Illustration: Eniola Odetunde/Axios. Photo: Ray Tamarra/Getty Images

Gov. Andrew Cuomo should be facing explicit calls to resign from President Biden on down, if you apply the standard that Democrats set for similar allegations against Republicans. And it's not a close call.

Why it matters: The #MeToo moment saw men in power run out of town for exploiting young women. Democrats led the charge. So the silence of so many of them seems more strange — and unacceptable by their own standards — by the hour.