The Federal Reserve's balance sheet

What this series measures

The Federal Reserve publishes its balance sheet every week in the H.4.1 release. The headline series is often called "total assets" or WALCL.

On the asset side, the Fed holds Treasury securities, agency mortgage-backed securities, loans, and other assets. On the liability side, the main items are currency in circulation, reserve balances held by banks, reverse repurchase agreements, and Treasury deposits.^[1]

Why reserves are not "money in the vault"

When the Fed buys a security, it credits the seller's bank with reserves. Reserves are a liability of the Fed and an asset of the bank. They are used for settlement, not for household spending.^[2]

The size of the balance sheet is therefore closely related to the quantity of reserves, but the relationship is not one-to-one. Currency, reverse repos, and other liabilities also change.

How to read it

• Distinguish assets from liabilities. A larger balance sheet is not automatically "more money" in the hands of households.
• Watch the composition: Treasuries, MBS, and loans have different implications.
• Compare the balance sheet with reserve balances and reverse repo balances.
• Remember that QE and QT are about the size and composition of the balance sheet, not a simple cash injection.^[3]
• Use FRED for the latest weekly values and the Fed's H.4.1 release for the detailed table.^[4]

Caveats

• The balance sheet is a policy instrument, not a welfare measure.
• A large balance sheet can coexist with low inflation, and a small one with high inflation. The macroeconomy depends on spending, supply, and expectations, not just reserves.
• Changes in the balance sheet can affect market functioning and the term premium in ways that are difficult to measure.