Alleged breaking News: Federal Reserve Balance Sheet Declines by $66 Billion in September to $7.05 Trillion

In a tweet posted by The Kobeissi Letter on October 12, 2024, it has been alleged that the Federal Reserve’s balance sheet declined by $66 billion in September to $7.05 trillion, the lowest level since September 2020. The tweet also mentions that since April 2022, the Fed has reduced its portfolio of assets by $1.92 trillion, which accounts for 40% of the $4.80 trillion in assets that the central bank had purchased.

While this information is claimed in the tweet, it is important to note that there is no official confirmation or proof provided to support these figures. The tweet serves as the source of this alleged breaking news.

The Federal Reserve plays a crucial role in the U.S. economy, as it is responsible for implementing monetary policy and regulating the country’s financial system. Any significant changes in the Fed’s balance sheet can have far-reaching implications for the economy and financial markets.

As of now, it remains to be seen how this alleged decline in the Federal Reserve’s balance sheet will impact the broader economic landscape. It is essential for investors, policymakers, and the general public to monitor the situation closely and stay informed about any developments related to this news.

For more updates and insights, stay tuned to The Kobeissi Letter for further analysis and coverage of this unfolding story.

BREAKING: The Federal Reserve’s balance sheet declined by $66 billion in September to $7.05 trillion, the lowest since September 2020.

Since April 2022, the Fed has shrunk its portfolio of assets by $1.92 trillion.

This is 40% of the $4.80 trillion the central bank bought… pic.twitter.com/0MLmKFx37J

— The Kobeissi Letter (@KobeissiLetter) October 12, 2024

How did the Federal Reserve’s balance sheet decline by $66 billion in September to $7.05 trillion, the lowest since September 2020?

The Federal Reserve’s balance sheet decreased by $66 billion in September, reaching $7.05 trillion, the lowest level since September 2020. This reduction can be attributed to the ongoing efforts by the Fed to shrink its portfolio of assets. The central bank has been implementing a strategy to gradually reduce its balance sheet size, which has led to a decrease in the total assets held by the Fed. This move is aimed at normalizing the Fed’s balance sheet after years of expansion following the global financial crisis.

One of the main ways the Fed has been reducing its balance sheet is by allowing its holdings of Treasury securities and mortgage-backed securities to mature without reinvesting the proceeds. This process, known as balance sheet normalization, has been gradually implemented by the Fed to unwind the massive asset purchases made during and after the financial crisis. As these securities mature, they are not being replaced, resulting in a decrease in the overall size of the Fed’s balance sheet.

Why has the Fed shrunk its portfolio of assets by $1.92 trillion since April 2022?

Since April 2022, the Federal Reserve has reduced its portfolio of assets by $1.92 trillion as part of its ongoing efforts to normalize its balance sheet. This significant reduction in assets held by the Fed is a result of the central bank’s strategy to gradually unwind the large-scale asset purchases made in response to the financial crisis. By shrinking its portfolio, the Fed aims to gradually remove the stimulus provided to the economy through its asset purchases and bring its balance sheet back to a more normal size.

The Fed’s decision to shrink its portfolio of assets is also influenced by its assessment of the current economic conditions. As the economy has shown signs of recovery and strength, the Fed has deemed it appropriate to reduce the level of monetary support provided through its asset holdings. By gradually reducing its portfolio, the Fed can ensure that monetary policy remains accommodative while also avoiding the risk of overheating the economy.

What does it mean that the $1.92 trillion reduction is 40% of the $4.80 trillion the central bank bought?

The $1.92 trillion reduction in the Federal Reserve’s portfolio of assets represents 40% of the $4.80 trillion in assets that the central bank had purchased through its various quantitative easing programs. This significant reduction highlights the Fed’s commitment to unwinding the unprecedented levels of asset purchases made in response to the financial crisis and subsequent economic downturn.

By reducing its portfolio by such a substantial amount, the Fed is signaling its confidence in the strength of the economy and its ability to stand on its own without the need for extraordinary monetary policy measures. This move also reflects the Fed’s focus on maintaining price stability and sustainable economic growth over the long term. As the Fed continues to normalize its balance sheet, it will be important to monitor how these actions impact financial markets and the broader economy.

Overall, the reduction in the Fed’s asset holdings is a significant milestone in the central bank’s efforts to return to a more normal operating environment and ensure that monetary policy remains effective and appropriate for the current economic conditions.

Sources: Federal Reserve, CNBC, Bloomberg.