4min snip

Macro Musings with David Beckworth cover image

Roberto Perli on the Past, Present, and Future of the Fed’s Balance Sheet

Macro Musings with David Beckworth

NOTE

Adapting to the Growth of the Financial System

Forecasting the size of the Fed's balance sheet is challenging due to factors like the Treasury General Account (TGA) and other non-reserved liabilities, which can vary significantly, particularly during crisis times. The growth of the global dollar market and the financial system as a whole has led to an increase in these uncertainties. The Fed's balance sheet is adapting to the development of the global financial system, but some critics argue that the traditional interbank markets are not what they used to be. However, the stability of the federal funds rate and its impact on other money market rates are viewed positively, indicating contentment with the current operating system at the Fed for now.

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