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THE FED THE FED THE FED. An update on the Fed Balance Sheet. By Jonathan Brice. Agenda. What is a balance sheet? Current makeup of the Fed Balance sheet Recent Trends Outlook Run for the hills?. Balance Sheet. A summary of the financial balances of the Fed.

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The fed the fed the fed

THE FED THE FEDTHE FED

An update on the Fed Balance Sheet.

By Jonathan Brice


Agenda
Agenda

What is a balance sheet?

Current makeup of the Fed Balance sheet

Recent Trends

Outlook

Run for the hills?


Balance sheet
Balance Sheet

  • A summary of the financial balances of the Fed.

  • Lists the Fed’s current Assets and Liabilities

    • For typical firm it would list A =L+OE, for the Fed it lists A=L+ Capital Accounts

  • Original report contains 12 sections

  • Released every Thursday afternoon around 4:30 p.m.


Current assets march 25 release
Current Assets (March 25 release)

  • Largest Assets:

    • Securities, repurchase agreements, and etc (91%)

    • The Fed (typically) makes billions of dollars on these assets

  • Smallest Assets:

    • CB Liquidity swaps (0%)

    • Repurchase Agreements (0%)


Current liabilities
Current Liabilities

  • Largest Liabilities:

    • Depository Institutions (51%)

    • Fed Notes (39%)







Summary of the evolution
Summary of the Evolution

  • Phase1 : Efforts to provide short-term funding to the markets (Foreign-Exchange Swaps)

  • Phase 2: As the liquidity facilities wound down, the BS shifter towards the assets acquired under large scale asset purchase programs (MBS)

    • $1.8 trillion of Treasury, agency and mortgage-backed securities


Outlook phase 3
Outlook: Phase 3

The Fed will finish their purchase of MBS this week

The Fed has tapered off purchases as programs approach their end, in order to help mitigate any possible adverse reactions


Potential risk
Potential Risk

  • The banking system currently has more than $1 trillion in reserves

  • The Fed must implement a strategy to successful shore up liquidity

  • Inflation?


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