The Fed’s Balance Sheet Reduction (QT) Update

The Fed culled its Treasury and mortgage-backed holdings for the week-ended December 31st. The Fed reduced its Treasury and mortgage-backed holdings (total SOMA activity) by $702 billion for 2024. This compares with a $931 billion reduction and 2023. The Fed’s tightening pales in comparison to the Fed having grown its balance sheet by some $5 Trillion from January 2020 through April 2022. The Fed’s net balance sheet growth explains why the U.S. has persistent price inflation.

• Treasuries: The Fed’s Treasury holdings declined by $17.9 billion for the week-ended December 31st. The Fed’s Treasury holdings declined by $24.9 billion on a rolling 4-week basis.

• Agencies: The Fed’s Government Agency security holdings declined by $12.2 billion for the week-ended December 31st. The Fed’s Government Agency holdings declined by $15.7 billion on a rolling 4-week basis.

• The Fed’s balance sheet holdings: https://www.newyorkfed.org/markets/soma-holdings

Source: Federal Reserve; TEK2day