Bloomberg ETF analyst Eric Balchunas has suggested that the Federal Reserve could expand its mandate to include the purchase of equity exchange-traded funds as a tool for stabilizing financial markets.
The proposal, reported by Polish business outlet Puls Biznesu, positions the central bank as a potential buyer of last resort for stock market volatility, a significant departure from its traditional focus on interest rates and government bonds.
Balchunas points to the Bank of Japan as a precedent, noting that the Japanese central bank has previously intervened in equity markets through ETF purchases.
However, he acknowledges that academic assessments of those interventions have been mixed, with some researchers characterizing the strategy as a misallocation of resources that failed to address underlying structural issues.
The suggestion comes amid growing divergence between equity and fixed-income markets regarding the Federal Reserve's policy trajectory.
US Treasury markets are currently pricing in a Federal Reserve rate hike by early autumn, a move that stands in stark contrast to the central bank's probable policy path.