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The Fed’s Enormous Balance Sheet Is Here to Stay

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The Fed’s Enormous Balance Sheet Is Here to Stay

August 25, 2021

This week the Fed will have its annual Jackson Hole meeting virtually. The markets will be looking for clues of a Fed taper, or it starting to shrink its purchases of long-dated and some private sector assets. But if history is any guide, the enormous Fed balance sheet is here to say. During the last two recessions the Fed bought an unprecedented number of assets and paid interest on its reserves. But even after the recession passed the balance sheet did not shrink to anything close to normal levels. Each recession brings a new normal, for the Fed and fixed income markets.

Source: Federal Reserve Economic Data

Allison Schrager is a senior fellow at the Manhattan Institute. Follow her on Twitter here.

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