AN UPDATE ON THE FED BALANCE SHEET. BY JONATHAN BRICE THE FED THE FED THE FED.
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AN UPDATE ON THE FED BALANCE SHEET.
BY JONATHAN BRICE
THE FED THE FED THE FED
Agenda
What is a balance sheet?Current makeup of the Fed Balance sheetRecent TrendsOutlookRun for the hills?
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 AccountsOriginal report contains 12 sections Released every Thursday afternoon around
4:30 p.m.
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 Assets (March 25 release)
Current Liabilities
Largest Liabilities: Depository
Institutions (51%) Fed Notes (39%)
Asset Trends
Selected Asset Trends
Fed Liquidity Facilities
Fed Institutional Supports
Selected Fed Liabilities
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
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
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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