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The Fed Is Shrinking Its Balance Sheet. What Does That Mean?

Author

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  • Timothy Sablik

Abstract

When the COVID-19 pandemic hit the United States in early March 2020, the Fed quickly stepped in to limit the economic fallout. It reduced its interest rate target to near zero and purchased large quantities of U.S. Treasury bonds and mortgage-backed securities (MBS) by injecting reserves into the banking system. As a result of these purchases, the size of the Fed's balance sheet more than doubled from about $4 trillion prior to the pandemic to nearly $9 trillion at the start of 2022.

Suggested Citation

  • Timothy Sablik, 2022. "The Fed Is Shrinking Its Balance Sheet. What Does That Mean?," Econ Focus, Federal Reserve Bank of Richmond, vol. 22(3Q), pages 4-7.
    • Handle: RePEc:fip:fedrrf:94705
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