Board of Governors of the Federal Reserve System

May 2022

Federal Reserve Balance Sheet Actions and Activities

The Federal Reserve prepares this balance sheet report to help further its commitment to transparency about actions taken in connection with two of its key functions—conducting monetary policy to meet its congressional mandate of maximum employment and price stability as well as promoting financial stability. The report contains a snapshot of Federal Reserve actions and activity in managing its balance sheet, including

• an overview of the Federal Reserve's balance sheet trends;
• a review of changes in key Federal Reserve assets; and
• a review of changes in key Federal Reserve liabilities.

The Role of the Balance Sheet in Meeting the Federal Reserve's Monetary Policy Mandate

The Federal Reserve conducts monetary policy in accordance with its mandate from Congress: to promote maximum employment and stable prices in the U.S. economy. Because smooth financial market functioning facilitates the transmission of monetary policy, the Federal Reserve monitors financial stability risks and takes appropriate actions to help ensure that financial institutions and financial markets can efficiently channel the flow of credit to households, communities, and businesses. Many of the actions that the Federal Reserve takes for monetary policy and financial stability purposes are reflected on the balance sheet.

The Federal Reserve considers transparency about the goals, conduct, and stance of monetary policy to be fundamental to the effectiveness of monetary policy. Transparency about monetary policy also helps promote the accountability of the Federal Reserve to Congress and the public. As a result, and in accordance with the Federal Reserve Act, the Federal Reserve publishes each week the H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks."¹

General Balance Sheet Trends

Overall, as shown in table 1, the size of the Federal Reserve's balance sheet increased roughly $490 billion from about $8.4 trillion on September 29, 2021, to about $8.9 trillion as of March 30, 2022.

Table 1. Assets, liabilities, and capital of the Federal Reserve System

On the asset side of the Federal Reserve's balance sheet, the increase was concentrated in securities held outright, reflecting the net asset purchases that concluded in early March 2022. On the liability side, a decline in reserve balances was more than offset by increases in the Treasury General Account (TGA) balance, take-up at the Federal Reserve's overnight reverse repurchase agreement (ON RRP) facility, and Federal Reserve notes.

Changes in Federal Reserve Assets

As shown in figure 1, total assets on the Federal Reserve's balance sheet rose roughly $490 billion over the past two quarters, to stand at nearly $8.9 trillion or 37 percent of gross domestic product (GDP) as of March 30, 2022. The increase in total assets was primarily driven by the increases in the securities held outright, which rose about $550 billion reflecting the net purchases of Treasury securities and agency mortgage-backed securities (MBS). The Federal Open Market Committee (FOMC) decided to start tapering net asset purchases in November 2021, and net purchases ceased in early March 2022.

The increase in securities held outright was partially offset by the decline in balances associated with the facilities established to support the flow of credit to households and businesses during the disruptions caused by the COVID pandemic. Most notably, outstanding PPPLF balances decreased $37 billion to roughly $24 billion, principally due to PPP loan repayment and the consequent paydown of the associated PPPLF loans.²

Changes in Federal Reserve Liabilities

As shown in figure 2, the Federal Reserve's liabilities expanded roughly $490 billion over the past two quarters. The TGA balance, take-up at the Federal Reserve's ON RRP facility, and Federal Reserve notes grew, while reserve balances declined. On net, reserve balances decreased roughly $320 billion, to about $3.8 trillion, as growth in assets was more than offset by increases in other non-reserve liabilities.

The TGA balance rose on net about $383 billion to $557 billion on March 30, 2022. In December 2021, just prior to the debt limit resolution, the TGA had declined to a trough of roughly $42 billion. However, following the resolution, the Treasury used large increases in net bill and coupon issuance to raise the level of the TGA back above its five-day cash need.^{3 ,4} According to the Treasury's May 2022 Quarterly Refunding Statement, the TGA is expected to rise further and reach a June quarter-end level of $800 billion.

Take-up at the ON RRP facility increased about $370 billion to $1.8 trillion on March 30, 2022. Ongoing elevated participation reflected low repo rates and limited Treasury bill supply, though participation declined somewhat in January as bill supply increased. Finally, Federal Reserve notes increased about $71 billion to $2.2 trillion.

Footnotes