The Fed’s balance sheet could reach $ 9 trillion by the end of 2022


People walk with masks outside the Federal Reserve Bank of New York in New York City, the United States, March 18, 2020. REUTERS / Lucas Jackson / File Photo

The Federal Reserve’s ongoing asset purchases could cause the central bank’s portfolio to grow to $ 9.0 trillion by the end of 2022 Projections released on Monday by the New York Fed.

Reserve balances could peak at $ 6.2 trillion by the end of 2022 and then steadily decline, according to projections released as part of an annual report by the New York Fed’s market team.

The Fed’s portfolio could remain stable through 2025 if the proceeds of maturing securities are reinvested. “After that, the portfolio’s path will depend on the decisions made regarding the portfolio as the FOMC normalizes monetary policy stance,” the report said.

It is projected that the Federal Reserve will continue to buy Treasury bills and mortgage-backed securities at the current pace of $ 120 billion per month through the end of 2021, before these purchases slowly decline to zero by the end of 2022. Future asset purchases and interest rates are based on the New York Fed surveys of market participants and primary traders.

The Fed’s balance sheet soared last year after the US Federal Reserve acted aggressively to support the economy and credit markets by cutting interest rates to near zero, launching a series of emergency loan programs, and increasing their monthly asset purchases .

The central bank’s portfolio was just under $ 8 trillion last week, the latest data available, down from around $ 4.1 trillion at the start of 2020.

Based on a number of potential outcomes, the Fed’s portfolio could either stay stable at $ 9 trillion through 2030 or fall to $ 6.6 trillion, according to the report.

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