Overview
Recent Developments
The Overview section of this report highlights recent developments in the operations of the Federal Reserve's monetary policy tools and presents data describing changes in the assets, liabilities, and total capital of the Federal Reserve System as of February 27, 2019.
FOMC Raises Target Range for the Federal Funds Rate; Federal Reserve Takes Associated and Related Implementation Steps
- On December 19, 2018, the Federal Open Market Committee (FOMC) announced that it had decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent, from 2 to
2-1/4 percent. Additional information on the FOMC's decision is available at https://www.federalreserve.gov/newsevents/pressreleases/monetary20181219a.htm and https://www.federalreserve.gov/newsevents/pressreleases/monetary20190109a.htm. - To implement this monetary policy stance, the FOMC directed the Federal Reserve Bank of New York (FRBNY) to conduct open market operations (OMOs), including overnight reverse repurchase operations, as necessary to maintain the federal funds rate in a target range of 2-1/4 to
2-1/2 percent. In related actions, effective December 20, 2018, the Board of Governors of the Federal Reserve System (Board) raised the interest rate paid on required and excess reserve balances to 2.40 percent and approved a 1/4 percentage point increase in the discount rate (the primary credit rate) to 3.00 percent. - In addition, the FOMC directed the FRBNY to continue rolling over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing during each calendar month that exceeded $30 billion, and to continue reinvesting in agency mortgage-backed securities (MBS) the amount of principal payments from the Federal Reserve's holdings of agency debt and agency MBS received during each calendar month that exceeded $20 billion. Small deviations from these amounts for operational reasons are acceptable. Additional information is available at https://www.federalreserve.gov/newsevents/pressreleases/monetary20181219a1.htm.
FOMC Revises Its Policy Normalization Principles and Plans
- In January and March 2019, the FOMC provided additional information regarding its plans for the size of its securities holdings in the System Open Market Account (SOMA) and the transition to a longer-run monetary policy operating regime.
- On January 30, 2019, the FOMC issued a Statement Regarding Monetary Policy Implementation and Balance Sheet Normalization stating that it intends to continue to implement monetary policy in a regime in which an ample supply of reserves ensures that control over the level of the federal funds rate and other short-term interest rates is exercised primarily through the setting of the Federal Reserve's administered rates and in which active management of the supply of reserves is not required. Additional information is available at https://www.federalreserve.gov/newsevents/pressreleases/monetary20190130c.htm.
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On March 20, 2019, the FOMC announced that to ensure a smooth transition to the longer-run level of reserves consistent with efficient and effective policy implementation, the Committee intends to slow the pace of the decline in reserves over coming quarters provided that the economy and money market conditions evolve about as expected. To implement this transition, the FOMC intends to slow the reduction of its holdings of Treasury securities by reducing the cap on monthly redemptions to $15 billion from $30 billion beginning in May 2019. The FOMC intends to conclude the reduction of its aggregate securities holdings in the SOMA at the end of September 2019.
The average level of reserves after the FOMC has concluded the reduction of its aggregate securities holdings will likely still be somewhat above the level of reserves necessary to efficiently and effectively implement monetary policy. In that case, the FOMC currently anticipates that it will likely hold the size of the SOMA portfolio roughly constant for a time. During such a period, persistent gradual increases in currency and other nonreserve liabilities would be accompanied by corresponding gradual declines in reserve balances to a level consistent with efficient and effective implementation of monetary policy. At that point, the SOMA will hold no more securities than necessary for efficient and effective policy implementation. - In addition, the FOMC intends to continue to allow its holdings of agency debt and agency MBS to decline, consistent with the aim of holding primarily Treasury securities in the longer run. Beginning in October 2019, principal payments received from agency debt and agency MBS will be reinvested in Treasury securities subject to a maximum amount of $20 billion per month; any principal payments in excess of that maximum will continue to be reinvested in agency MBS. Additional information is available at https://www.federalreserve.gov/newsevents/pressreleases/monetary20190320c.htm.
- Additional information on the FOMC's Policy Normalization Principles and Plans is available at https://www.federalreserve.gov/monetarypolicy/policy-normalization.htm.
Federal Reserve Board Publishes Annual Financial Statements
On March 22, 2019, the Federal Reserve System released the 2018 audited financial statements for the combined Federal Reserve Banks, the 12 individual Reserve Banks, and the Board. Additional information can be found in the section of the report entitled "Federal Reserve Bank's Financial Information." The Federal Reserve System financial statements are available on the Board's website at https://www.federalreserve.gov/aboutthefed/audited-annual-financial-statements.htm.
Federal Reserve System Assets, Liabilities, and Total Capital
Table 1 reports selected assets, liabilities, and total capital of the Federal Reserve System and presents the change in these components over selected intervals. The Federal Reserve publishes its complete balance sheet each week in the H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks," available at https://www.federalreserve.gov/releases/h41/.
Figure 1 displays the levels of selected Federal Reserve assets and liabilities, securities holdings, and credit extended through liquidity facilities since April 2010.
Table 1. Assets, liabilities, and capital of the Federal Reserve System
Billions of dollars
| Item | Current February 27, 2019 |
Change from October 24, 2018 |
Change from February 28, 2018 |
|---|---|---|---|
| Total assets | 3,975 | -198 | -419 |
| Selected assets | |||
| Securities held outright | 3,792 | -181 | -396 |
| U.S. Treasury securities1 | 2,182 | -112 | -242 |
| Federal agency debt securities 1 | 2 | -* | -2 |
| Mortgage-backed securities2 | 1,608 | -69 | -152 |
| Memo: Overnight securities lending 3 | 21 | +5 | -5 |
| Memo: Net commitments to purchase mortgage-backed securities 4 | * | -3 | -13 |
| Unamortized premiums on securities held outright 5 | 137 | -7 | -19 |
| Unamortized discounts on securities held outright 5 | -13 | +* | +1 |
| Lending to depository institutions6 | * | -* | -* |
| Central bank liquidity swaps 7 | * | +* | +* |
| Net portfolio holdings of Maiden Lane LLC8 | * | -* | -2 |
| Foreign currency denominated assets9 | 21 | +* | -1 |
| Total liabilities | 3,935 | -199 | -419 |
| Selected liabilities | |||
| Federal Reserve notes in circulation | 1,665 | +22 | +85 |
| Reverse repurchase agreements10 | 251 | +25 | -26 |
| Foreign official and international accounts 10 | 249 | +30 | +16 |
| Others 10 | 2 | -5 | -43 |
| Term deposits held by depository institutions | 0 | 0 | 0 |
| Other deposits held by depository institutions | 1,682 | -143 | -526 |
| U.S. Treasury, General Account | 266 | -95 | +67 |
| Other deposits 11 | 59 | -9 | -18 |
| Total capital | 39 | +* | -* |
Note: Unaudited. Components may not sum to totals because of rounding.
* Less than $500 million.
1. Face value. Return to table
2. Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities. Return to table
3. Securities loans under the overnight facility are off-balance-sheet transactions. These loans are shown here as a memo item to indicate the portion of securities held outright that have been lent through this program. Return to table
4. Current face value. Includes commitments associated with outright purchases, dollar rolls, and coupon swaps. Return to table
5. Reflects the premium or discount, which is the difference between the purchase price and the face value of the securities that has not been amortized. For U.S. Treasury securities, federal agency debt securities, and mortgage-backed securities, amortization is on an effective-interest basis. Return to table
6. Total of primary, secondary, and seasonal credit. Return to table
7. Dollar value of the foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to the foreign central bank. This exchange rate equals the market exchange rate used when the foreign currency was acquired from the foreign central bank. Return to table
8. Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date. Assets are revalued quarterly. Return to table
9. Revalued daily at current foreign currency exchange rates. Return to table
10. Cash value of agreements, which are collateralized by U.S. Treasury securities, federal agency debt securities, and mortgage-backed securities. Return to table
11. Includes deposits held at the Reserve Banks by international and multilateral organizations, government-sponsored enterprises, designated financial market utilities, and deposits held by depository institutions in joint accounts in connection with their participation in certain private-sector payment arrangements. Also includes certain deposit accounts other than the U.S. Treasury, General Account, for services provided by the Reserve Banks as fiscal agents of the United States. Return to table
Figure 1. Credit and liquidity programs and the Federal Reserve's balance sheet
