Advanced Search
MyIDEAS: Login

The Federal Reserve's balance sheet: a primer and projections

Contents:

Author Info

  • Seth B. Carpenter
  • Jane E. Ihrig
  • Elizabeth C. Klee
  • Alexander H. Boote
  • Daniel W. Quinn
Registered author(s):

    Abstract

    Over the past few years, the Federal Reserve's use of unconventional monetary policy tools has led it to hold a large portfolio of securities. The securities holdings in excess of historical norms have been shown to be putting downward pressure on longer-term interest rates. One question asked is how long this unusual amount of monetary policy accommodation will be in place. Here we provide projections of the evolution of the Federal Reserve's balance sheet that are consistent with public economic forecasts and announced Federal Open Market Committee policy principles to help answer this question. We begin with a primer on the Federal Reserve's balance sheet. Then, with the foundational concepts in place, we present a framework for projecting Federal Reserve assets and liabilities through time. In the projections, the Federal Reserve's balance sheet remains large by historical standards for several years. Our baseline projection suggests that market participants likely do not expect the Federal Reserve's portfolio to return to a more normal size until August 2017, and its composition to return to normal until September 2018. Overall, this suggests that market participants believe that unconventional monetary policy will be in place for some time, likely depressing longer-term interest rates for a number of years.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.federalreserve.gov/pubs/feds/2012/201256/201256abs.html
    Download Restriction: no

    File URL: http://www.federalreserve.gov/pubs/feds/2012/201256/201256pap.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2012-56.

    as in new window
    Length:
    Date of creation: 2012
    Date of revision:
    Handle: RePEc:fip:fedgfe:2012-56

    Contact details of provider:
    Postal: 20th Street and Constitution Avenue, NW, Washington, DC 20551
    Web page: http://www.federalreserve.gov/
    More information through EDIRC

    Order Information:
    Web: http://www.federalreserve.gov/pubs/feds/fedsorder.html

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Marquez, Jaime & Morse, Ari & Schlusche, Bernd, 2013. "The Federal Reserve’s balance sheet and overnight interest rates: Empirical modeling of exit strategies," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5300-5315.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2012-56. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.