Kevin Spires, CFA, FRM
The Federal Reserve just released their weekly balance sheet update (Fed H4.1 Report) and Monetary Base update (Fed H3 Report). The Federal Reserve has held their balance sheet relatively constant just below 3 Trillion USD this year, with no growth in total over the past 12 months.
The Federal Reserve just released their weekly balance sheet update (Fed H4.1 Report) and Monetary Base update (Fed H3 Report). The Federal Reserve has held their balance sheet relatively constant just below 3 Trillion USD this year, with no growth in total over the past 12 months.
Over the past 3+ years, the composition of the Fed's balance sheet has changed, with most of the special programs rolling off and being replaced with Treasuries and Agency Mortgage Backed Securites (MBS). At the height of the Crisis, special programs took up 1.5 Trillion of the Fed's Balance Sheet.
With the Federal Reserve not expanding their balance sheet, the supply of high powered money - the Monetary Base - has stagnated. Over the past year, the Monetary Base has actually dropped by a bit over 1%. This is not yet a worry, as most of the Fed Money Printing was just kept as excess reserves (which had reached 1.58 Trillion at their peak) on deposit with the Federal Reserve and not lent out. The Monetary Base less the excess reserves has grown at a healthy 9%+ rate over the past year.
While not yet a concern, because there are still 1.4 Trillion in excess reserves that banks could use to propel increased lending, these reports should be followed closely to see if banks are starting to lend out their reserves, or conversly, pull back from lending.
While not yet a concern, because there are still 1.4 Trillion in excess reserves that banks could use to propel increased lending, these reports should be followed closely to see if banks are starting to lend out their reserves, or conversly, pull back from lending.
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