Change in the Federal Reserve balance sheet
Y-axis: Trillions ($), x-axis: 2006 – 2021
Recessions shown: December 2007 – June 2009, and February – April 2020
From 2006 to late 2008 the Fed balance sheet stood just under $1 trillion. But by year-end 2008 it had increased sharply to more than $2 trillion. It then rose gradually to over $2.8 trillion by January 2012, remaining at roughly that level until it began rising again in January 2013, reaching nearly $4.5 trillion by January 2015.
From that point until September 2019 the Fed balance sheet gradually declined to about $3.7 trillion. But by February 2020 it had risen again to over $4.1 trillion. It then rose very sharply, reaching over $7 trillion by June 2020. Since then it has continued to rise, less sharply, reaching about $8.4 trillion in September 2021.
Sources: Bloomberg and Wells Fargo Investment Institute. Weekly data from January 4, 2006 to September 30, 2021. Shaded area represents time frame of a U.S. economic recession. Fed = Federal Reserve.
- The Federal Reserve (Fed) balance sheet has increased significantly over the past decade. While the Fed began to decrease its balance sheet in early 2018, the pandemic hit before it normalized.
- The Fed has begun discussing its intention to taper asset purchases in order to decrease its balance sheet.
- We expect the Fed to begin tapering late 2021 or early 2022, and expect the tapering process to last at least a year.