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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

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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‚Äôs 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%)


Asset trends

Asset Trends


Selected asset trends

Selected Asset Trends


Fed liquidity facilities

Fed Liquidity Facilities


Fed institutional supports

Fed Institutional Supports


Selected fed liabilities

Selected Fed Liabilities


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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