The Fed’s Balance Sheet: $1 Trillion…$2 Trillion…$3 Trillion…
Towards the end of last year, the Federal Reserve announced not one, but two quantitative easing programs. These two new rounds of money printing have now officially pushed the central bank’s balance sheet to a new trillion dollar level.
According to the latest statistical release, the Federal Reserve’s total assets increased $47.9 billion in the past week to hit $3.01 trillion, a fresh all-time record. Holdings of U.S. Treasury securities rose $7.8 billion to $1.697 trillion, while mortgage-backed securities in the portfolio jumped $35.6 billion to $983.17 billion. In comparison, the central bank reported total assets of $926.6 billion in the beginning of 2008, before four rounds of quantitative easing.
In September, the Federal Open Market Committee announced QE3, which buys agency mortgage-backed securities at a pace of $40 billion per month. The program is open-ended and will continue for as long as the Federal Reserve thinks is necessary. Three months later, the central bank announced it would purchase $45 billion of long-term Treasury securities, known as QE4. It also decided to keep interest rates at historic lows as long as the unemployment rate remains above 6.5 percent.
With the Federal Reserve increasing its long-term holdings around $85 billion per month, its balance sheet is well on its way to hitting $4 trillion near the end of this year. “You’re hard-pressed to find another example in history where the Fed pulled out all the stops to help a recovery along,” said Michael Hanson, senior U.S. economist at Bank of America, according to Bloomberg. While the central bank may provide brief moments of hope that it will be able to halt these bond purchasing programs in the near future, some market participants feel otherwise.
QE for years…
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