The US Federal Reserve is accumulating assets on its balance sheet at lightning speed, with fresh projections from the New York Fed estimating the bank’s portfolio will grow to $9 trillion by the end of 2022.
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The Fed’s portfolio might hold steady through 2025 if proceeds from maturing securities are reinvested.
After that point, the path of the portfolio will depend on choices made regarding the portfolio as the FOMC normalizes the stance of monetary policy, the report says.
The calculations assume that the central bank will continue to buy Treasury securities and mortgage-backed securities at the current pace of $120 billion per month through the end of 2021 – a process which caused the 2008 financial crash. The purchases will decline to zero by the end of 2022. Those assumptions on future asset purchases and interest rates are based on the New York Fed’s surveys of market participants and primary dealers.
Last year, the Feds balance sheet ballooned after the central bank aggressively expanded monetary and fiscal policy, pumping upwards of $9 trillion into the economy and credit markets. The operation was done via emergency funds, lending programs, lowered interest rates and a massive expansion in monthly asset purchases, propping up financial markets as the economy went in the opposite direction.
Just last week, the central bank’s portfolio stood at just under $8 trillion, nearly double from $4.1 trillion at the start of 2020.
According to the report, the Fed’s balance sheet could hold near $9 trillion until 2030 or fall as low as $6.6 trillion, though this is clearly subject to revisions and ‘choices‘ made in the coming months and years.
As central bankers tinker with global finances and miss inflation targets laid out last year, bitcoin’s inflation rate remains entirely predictable at 1.67% and declining. The next halving is scheduled for March 2024.
Bitcoin is up approximately 350% year-to-date, exchanging hands at $38,000 at the time of publishing.
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