The Fed balance sheet has grown sharply

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.

Key Takeaways

  • 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.