Federal Reserve Will Not Slow Down Asset Purchases In New FOMC Statement
In Brief
- In a new FOMC statement, the Federal Reserve has noted that it will continue asset purchases.
- The Federal Reserve balance sheet has soared past $7 Trillion to an all-time high.
In a new FOMC (Federal Open Market Committee) statement, the Federal Reserve noted it will continue doing its best to support the US economy despite the economic fallout due to the coronavirus outbreak. In addition to keeping interest rates near-zero, the Federal Reserve will continue its asset purchasing program.
To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations.
FOMC Statement
Federal Reserve Balance Sheet Soars
The process by which the Federal Reserve purchases assets to inject money into an economy is often called quantitative easing (QE). By purchasing more assets, the Federal Reserve’s balance sheet rises.
Amid the coronavirus outbreak, the Fed’s QE program has resulted in an exponential rise in the balance sheet. Since the beginning of this year, the balance sheet has grown nearly $3 trillion. Furthermore, with the Federal Reserve planning to continue asset purchases, the balance sheet may only grow further.
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