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Trump: Russian economy is going to collapse
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Understanding the Feds Balance Sheet Thank you, Emily. And thank you to the National Association for Business Economics for the Adam Smith Award. It is an honor just to be mentioned alongside past recipients, including my predecessors Janet Yellen and Ben Bernanke. Thank you for this recognition and for the opportunity to speak with you today. Monetary policy is more effective when the public understands what the Federal Reserve does and why. With that in mind, I hope to enhance understanding of one of the more arcane and technical aspects of monetary policy: the Federal Reserve's balance sheet. A colleague recently compared this topic to a trip to the dentist, but that comparison may be unfairto dentists.1 Today, I will discuss the essential role our balance sheet played during the pandemic, along with some lessons learned. I will then review our ample reserves implementation framework and the progress we have made toward normalizing the size of our balance sheet. I will conclude with some brief remarks on the economic outlook. One of the primary purposes of a central bank is to provide the monetary foundation for the financial system and the broader economy. This foundation is made of central bank liabilities. On the Fed's balance sheet, the liability side of the ledger totaled $6.5 trillion as of October 8, and three categories account for roughly 95 percent of that total.2 First, Federal Reserve notesthat is, physical currencytotaled $2.4 trillion. Second, reservesfunds held by depository institutions at the Federal Reserve Bankstotaled $3.0 trillion. These deposits allow commercial banks to make and receive payments and meet regulatory requirements. Reserves are the safest and most liquid asset in the financial system, and only the Fed can create them. The adequate provision of reserves is essential to the safety and soundness of our banking system, the resilience and efficiency of our payments system, and ultimately the stability of our economy. FEDS POWELL: AVAILABLE DATA SHOW TARIFFS PUSHING UP PRICE PRESSURES FEDS POWELL: U.S. CENTRAL BANK HAS OTHER DATA BEYOND GOVERNMENT SOURCES TO USE FEDS POWELL: CURRENT FED POLICY TOOLKIT WORKING VERY WELL POWELL: OUTLOOK HASNT CHANGED MUCH SINCE SEPTEMBER FED MEETING FEDS POWELL: MAY BE APPROACHING END OF BALANCE SHEET CONTRACTION IN COMING MONTHS