Board of Governors of the Federal Reserve System

December 2024

Federal Reserve Balance Sheet Actions and Activities

The Federal Reserve prepares this balance sheet report to help further its commitment to transparency about actions taken in connection with two of its key functions: conducting monetary policy to meet its congressional mandate of maximum employment and price stability as well as promoting financial stability. The report contains a snapshot of Federal Reserve actions and activity in managing its balance sheet, including

• an overview of the Federal Reserve's balance sheet trends;
• a review of changes in key Federal Reserve assets; and
• a review of changes in key Federal Reserve liabilities.

The Role of the Balance Sheet in Meeting the Federal Reserve's Monetary Policy Mandate

The Federal Reserve conducts monetary policy in accordance with its mandate from Congress: to promote maximum employment and stable prices in the U.S. economy. Because sustainably achieving maximum employment and price stability depends on a stable financial system and because smooth financial market functioning facilitates the transmission of monetary policy, the Federal Reserve monitors financial stability risks and takes appropriate actions to help ensure that financial institutions and financial markets can efficiently support the flow of credit to households, communities, and businesses. The Federal Reserve's policy actions in support of its goals may have implications for the size and composition of its balance sheet.

The Federal Reserve considers transparency about the goals, conduct, and stance of monetary policy to be fundamental to the effectiveness of monetary policy. Transparency about monetary policy also helps promote the accountability of the Federal Reserve to Congress and the public. As a result, and in accordance with the Federal Reserve Act, the Federal Reserve publishes each week the H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks."¹

General Balance Sheet Trends

Since the previous report, the size of the Federal Reserve's balance sheet decreased roughly $400 billion, from about $7.5 trillion on March 27, 2024, to about $7.1 trillion as of September 25, 2024, as shown in table 1.

Table 1. Assets, liabilities, and capital of the Federal Reserve System

On the asset side of the Federal Reserve's balance sheet, securities held outright continued to decline, consistent with the Federal Open Market Committee's (FOMC's) "Plans for Reducing the Size of the Federal Reserve's Balance Sheet" announced at its May 2022 policy meeting.² In addition, loans made by the Federal Reserve decreased on net.

On the liability side of the Federal Reserve's balance sheet, take-up at the Federal Reserve's overnight reverse repurchase agreement (ON RRP) facility decreased slightly, while reserve balances declined moderately on net.

Changes in Federal Reserve Assets

As shown in figure 1, total assets on the Federal Reserve's balance sheet declined $405 billion over the past two quarters, to stand at $7.1 trillion, or 24 percent of nominal gross domestic product (GDP), as of September 25, 2024. Securities held outright fell $340 billion, mostly reflecting runoff of Treasury securities and to a lesser extent agency mortgage-backed securities. The Federal Reserve's securities holdings have declined by about $1.8 trillion since the beginning of balance sheet runoff in June 2022. Loans also declined on net since the previous report, as $47 billion in Bank Term Funding Program (BTFP) loans were repaid and discount window lending declined slightly.³ The remaining BTFP loans will mature by March 11, 2025.⁴

Changes in Federal Reserve Liabilities

As shown in figure 2, the Federal Reserve's liabilities decreased $405 billion since March 2024 to a total of $7.0 trillion as of September 25, 2024. Take-up at the ON RRP facility fell $102 billion, reflecting greater availability of higher-yielding alternative money market instruments such as Treasury bills and repurchase agreements (repos), while balances in the Treasury General Account rose $7 billion. Reserve balances fell by $330 billion on net.

Consolidated net income across the Federal Reserve System remained negative on net since March 2024, mainly driven by interest expenses.⁵ As of September 25, 2024, the Federal Reserve System reported a consolidated deferred asset of $200 billion in connection with accumulated negative net income.⁶ Negative net income, and the corresponding creation of a deferred asset, do not affect the Federal Reserve's ability to conduct monetary policy or meet its financial obligations.

Footnotes