Fed May Shift to Moderate Money Printing, Economist Lyn Alden Says
As the Federal Reserve moves through a complex leadership transition, market analysts are recalibrating expectations for the future of U.S. monetary policy.
Economist Lyn Alden suggests the central bank may be shifting away from aggressive intervention toward a more gradual expansion of its balance sheet, a strategy aimed at keeping pace with nominal GDP growth rather than flooding markets with liquidity.
Against the backdrop of President Donald Trump’s nomination of Kevin Warsh to succeed Jerome Powell, the potential shift marks a key moment for investors trying to understand the long-term trajectory of currency debasement and its impact on scarce assets.
Gradual Fed Balance Sheet Expansion Expected
In a recent investment strategy newsletter, Alden argued that the Federal Reserve is entering a more measured phase of money creation. Under this approach, the central bank would expand its balance sheet at roughly the same proportional rate as total bank assets or nominal GDP.
Such a strategy, she noted, would likely support asset prices, but in a moderate and steady fashion rather than triggering dramatic rallies. The shift in tone comes as markets assess the implications of Warsh’s nomination, with many traders viewing him as more hawkish on interest rates than Powell.
Uncertainty around policy direction has also been fueled by Powell’s mixed forward guidance and the approaching end of his term in May 2025. Investors are now weighing how leadership changes could influence the pace of monetary expansion.
Money Supply Growth Remains a Key Signal
The Federal Reserve’s M2 measure of the money supply continues to expand, pointing to a growing monetary base.
Historically, this trend has been seen as supportive for risk assets, including cryptocurrencies, as expanding credit conditions tend to lift prices.
By contrast, tighter monetary conditions and higher interest rates often slow economic activity and weigh on asset markets. For many investors, the trajectory of the money supply remains a critical indicator of broader market direction.
Rate Cut Odds Decline Ahead of FOMC Meeting
Recent CME Group FedWatch data shows that only 19.9% of traders expect an interest rate cut at the next Federal Open Market Committee meeting in March, down from 23% just days earlier.
The drop in expectations reflects the growing uncertainty around the Fed’s policy path and the upcoming confirmation process for Warsh.
Powell has issued mixed signals about interest rates despite implementing several cuts throughout 2025. His recent remarks shed light on the difficult trade-offs facing policymakers, noting that there is no risk-free path for monetary policy in the current environment.
Alden’s View: All Roads Lead to Debasement
Alden maintains that, regardless of the specific policy path, long-term monetary dynamics still point toward gradual currency debasement.
In her newsletter, she wrote that her base case aligns with the Fed’s own projections: expanding the balance sheet at a pace similar to total bank assets or nominal GDP.
She also emphasized the importance of holding high-quality scarce assets and rebalancing portfolios away from overheated sectors. According to Alden, this approach may help investors navigate a landscape shaped by steady, but not excessive, monetary expansion.
Investors Watch the Policy Road Ahead
As the Federal Reserve continues to manage leadership changes and shifting economic conditions, markets remain focused on signals around interest rates, money supply growth, and balance sheet policy.
While the path forward remains uncertain, the central bank’s approach to monetary expansion is expected to play a major role in shaping asset prices and investor sentiment in the months and years ahead.
