Fed’s Balance Sheet Tops $3 Trillion for First Time


Source: MSN Money – Fed’s Balance Sheet Tops $3 Trillion for First Time

Notable excerpts:

This week marked a historic event for the Federal Reserve, the monetary institution that has seen its share of historic events since the onset of the financial crisis in 2007. The Fed’s balance sheet grew to $3 trillion for the first time everthe largest in the Fed’s nearly 100 year history.

“The Fed began purchasing $85 billion per month earlier in January as part of its expanded third round of quantitative easing. Initially, the Fed had planned to purchase $45 billion per month in mortgage backed securities.”

However, with the expiration of the second Operation Twist in December, the Fed rolled the purchases of treasury bonds into QE3 and began purchasing a total of $85 billion per month in securities this month.

As of Jan. 23, the Fed’s balance sheet climbed by $48 billion to $3.01 trillion, according to a release from the central bank Thursday from its Washington headquarters.

The recent moves by the Fed are being called the most revolutionary policy measures taken by the central bank since its inception, potentially second only to Paul Volcker in the 1970’s. Volcker, the Fed Chairman from 1979 to 1987, raised interest rates as high as 22% during his tenure, to end the stagflation that plagued the era and cool inflation.


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