The Fed’s balance sheet increased slightly over the week and rose to $ 7.09 trillion.
At the same time, the US Treasury slowed down the rate of growth of the national debt, for the period from September 17 to 24, the total amount of the United States government’s liabilities decreased by $ 4 billion. That is, the Ministry of Finance did not act as a “vacuum cleaner”, pumping out newly printed money.
The balance of the US regulator increased primarily due to the purchase of government bonds and debt securities backed by mortgages. In turn, the central banks of other countries returned previously borrowed funds, thus, the rate of expansion of the Fed’s balance sheet was reduced by $ 35.2 billion. Thus, it can be assumed that there are no problems with dollar liquidity in the world yet.
However, the Fed’s actions have not yet led to an upward trend in the free reserves of the US banking system, which decreased by $ 21.2 billion over the same period.
US bank reserves (USD million)
Source: US Federal Reserve
Against the background of the crisis in the country’s economy, a drop in bank reserves may adversely affect the functioning of the financial system, by the way, financial conditions continue to gradually deteriorate, and this, over time, can lead to liquidity problems, which will force market participants to sell part of their assets, thereby provoking a decline in prices on them.
Based on the current dynamics of the markets and the internal state of the financial system, we can conclude that the current actions of the Fed are not enough to continue the “feast” in the markets, and new money is needed for growth, or the economy needs to revive sharply.
- Fed balance sheet