Reserve

<h2 id="quick-take">Quick Take</h2>
<p>The Federal Reserve’s balance sheet has seen another sizeable reduction this past week, shedding approximately $40 billion. This now brings the balance sheet’s cumulative contraction to around $1 trillion from its peak. At its zenith, the balance sheet surged to an unprecedented $8.96 trillion.</p>
<p>Currently, it stands at a slightly more modest $7.86 trillion, indicating a reduction of approximately $1.1 trillion. However, it’s important to contextualize this contraction within the broader economic landscape. Even with this reduction, the balance sheet remains $3.5 trillion larger than before the COVID-19-induced expansion.</p>
<p>A recession has followed instances of interest rate hikes by the system since 2006. We observed this pattern when the Fed increased rates to 5.25; as the recession ensued, the rates dropped, and the balance sheet inflated. A similar circumstance unfolded on the verge of the COVID-19 pandemic in 2019. This poses the critical question: Are we poised to witness a recurrence of this cycle?</p>
<figure id="attachment_370871" aria-describedby="caption-attachment-370871" style="width: 100%" class="wp-caption aligncenter"><img class="wp-image-370871 size-full" src="https://cryptoslate.com/wp-content/uploads/2023/11/fed.png" alt="Federal Reserve Balance sheet, Effective federal funds rate: (Source: FRED)" width="1317" height="489" srcset="https://cryptoslate.com/wp-content/uploads/2023/11/fed.png 1317w, https://cryptoslate.com/wp-content/uploads/2023/11/fed-300x111.png 300w, https://cryptoslate.com/wp-content/uploads/2023/11/fed-1024x380.png 1024w, https://cryptoslate.com/wp-content/uploads/2023/11/fed-768x285.png 768w" sizes="(max-width: 1317px) 100vw, 1317px">
 <figcaption id="caption-attachment-370871" class="wp-caption-text">
  Federal Reserve Balance sheet, Effective federal funds rate: (Source: FRED)
 </figcaption>
</figure>
<p>The post <a rel="noopener noreferrer nofollow" href="https://cryptoslate.com/insights/the-shrinking-giant-feds-balance-sheet-down-by-1t/">The shrinking giant: Fed’s balance sheet down by $1T</a> appeared first on <a rel="noopener noreferrer nofollow" href="https://cryptoslate.com">CryptoSlate</a>.</p>

The shrinking giant: Fed’s balance sheet down by $1T

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