Fed Balance Sheet

What Is the Fed Balance Sheet?

The Fed balance sheet is a statement listing the assets and liabilities of the Federal Reserve System. Subtleties of the Fed's balance sheet are unveiled by the Fed in a week after week report called "Elements Affecting Reserve Balances."

Understanding the Fed Balance Sheet

The Fed is the central bank of the United States, established by Congress in 1913 to guarantee the stability of the country's financial and banking systems in times of crisis.

For quite a bit of its history, the Fed's balance sheet was a tired point. Issued each Thursday, the week after week balance sheet report counts the assets and liabilities of the Federal Reserve by type just as a corporate balance sheet does, giving a consolidated statement of the condition of every one of the 12 regional Federal Reserve Banks.

The Fed's assets comprise fundamentally of government securities it has bought and credit extended to banks and other financial institutions. Its liabilities, in the interim, remember bank and Treasury reserve balances for deposit with the Fed as well as U.S. currency in circulation.

The week after week balance sheet report turned out to be more important as a financial and economic indicator after the 2008 financial crisis, when the Fed initiated a policy of quantitative easing (QE). The Fed balance sheet gave analysts added understanding into the scope and scale of Fed market operations. Specifically, it permitted analysts to monitor the pace of asset purchases.

The Fed Balance Sheet and Quantitative Easing (QE)

QE is a monetary policy in which a central bank purchases large amounts of government bonds or other securities on the open market to hold down long-term interest rates and signal loose monetary policy.

The Fed (and other central banks) have utilized quantitative easing, otherwise called large scale asset purchases, to support economic growth past what could be accomplished by bringing short-term interest rates down to zero.

The policy has drawn political analysis yet has turned into an increasingly common response to economic and credit emergencies, utilized successfully by the European Central Bank and the Bank of Japan alongside the Fed.

Special Considerations

The Fed's balance sheet might seem as though a corporate one, however central banks are unique in their unlimited supply of currency. Rather than a corporation, the Fed and other central banks exist not to bring in money but rather to guarantee economic and financial stability.

The Fed's job is similar to that of the bank in the board game Monopoly: its goal isn't to win yet to supply sufficient money to keep the game going. The right amount of assets for the Fed is what best empowers it meet its order.

Features

• The Fed balance sheet is a listing of the Federal Reserve's assets and liabilities.
• The Fed's balance sheet has developed decisively beginning around 2008 to support the economy after the global financial crisis and again following the flare-up of the COVID-19 pandemic.
• The Fed's assets and liabilities are unveiled in a week after week report by the Fed.