Fed Assets Reach Record $2.39 Trillion on Purchases of Bonds
The Federal Reserve’s balance sheet reached a record $2.39 trillion as the central bank increased its holdings of Treasury securities as part of a bid to boost economic growth.
Treasuries held by the Fed increased by $32.2 billion to $949.6 billion as of Dec. 8, according to a weekly release by the central bank today, while the Fed’s holdings of mortgage- backed securities and federal agency debt securities were unchanged.
The Fed has bought $106.3 billion in Treasuries on its way to purchasing $600 billion of government debt through June 2011. Separately, it has purchased $75.8 billion of Treasuries as part of its plan, announced in August, to reinvest maturing mortgage holdings. The second round of unconventional monetary easing is aimed at spurring economic growth and preventing inflation from falling too low.
The asset purchase plan has drawn fire from Republicans in Congress who say the policy will fuel inflation and depreciate the value of the U.S. dollar.
The Fed’s balance sheet reached its previous peak of $2.35 trillion on May 19, 2010, after completing the purchase of $1.25 trillion in mortgage-backed securities. Its balance sheet then declined through August, as the Fed’s holdings of mortgage backed securities matured and were not replaced. On Aug. 10, the Fed announced it would reinvest maturing mortgage bonds to put a floor on its holdings of securities.
M2 money supply rose by $3 billion in the week ended Nov. 29, the Fed said. That left M2 growing at an annual rate of 3.1 percent for the past 52 weeks, below the target of 5 percent the Fed once set for maximum growth. The Fed no longer has a formal target.
The Fed reports two measures of the money supply each week. M1 includes all currency held by consumers and companies for spending, money held in checking accounts and travelers checks. M2, the more widely followed, adds savings and private holdings in money market.
M1 increased $27.3 billion, and over the past 52 weeks M1 rose 7 percent, according to the central bank. The Fed no longer publishes figures for M3.
To contact the reporter on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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