Fed Assets Reach Record $4 Trillion on Unprecedented Bond-Buying
By Jeff Kearns - Dec 19, 2013
The Federal Reserves balance sheet reached a record $4 trillion, as the central bank pushed on with its unprecedented asset-purchase program.
The Feds holdings rose $14.1 billion to $4.01 trillion in the past week, the Fed said today in a statement in Washington. Policy makers said yesterday they will slow monthly purchases of Treasuries and mortgage bonds to $75 billion in January, the first cut to the $85 billion pace they maintained for a year.
Were going to be living with a big Fed balance sheet for a long time, said Josh Feinman, the New York-based global chief economist for Deutsche Asset & Wealth Management, which oversees $1.2 trillion, and a former Fed senior economist. Theyre still missing their dual mandate on both sides and that would call for easy monetary policy with unemployment too high and inflation too low.
Chairman Ben S. Bernanke has raised assets from $2.82 trillion before the third round of quantitative easing began in September 2012 and quadrupled them since 2008 to attack unemployment after the 2008-2009 recession. He said yesterday the Fed may take similar moderate steps at each meeting to slow QE, which also carries potential risks.
As the balance sheet of the Federal Reserve gets large, managing that balance sheet, exiting from that balance sheet become more difficult, Bernanke said at his press conference. There are concerns about effects on asset prices, although I would have to say thats another thing that future monetary economists will want to be looking at very carefully.
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