5.1. Between 1/6/2010 and 11/19/2015, did the Fed’s balance sheet expand or shri

Question

5.1. Between 1/6/2010 and 11/19/2015, did the Fed’s balance sheet expand or shrink, and by how much? What does it tell you about the Fed’s monetary policy between these two dates?

5.2. What are the major changes on the assets side? (Go down to the lowest level of items and list at least 2 items.) What does it imply about the Fed’s monetary policy during that period?

5.3. What are the major changes on the liabilities side? (Again, go down to the lowest level of items and list at least 2 items.) If the balance sheet expanded, where did the Fed get the funding to expand its balance sheet? (Or, if the balance sheet shrank, which funding source was reduced the most?)

5.4. The market is paying close attention to the Fed’s next major policy move. What is that move likely to be (e.g., Q.E.? interest rate change? etc.)

Explanation / Answer

1.The balance sheet has expanded by 2,248,222 million $, the monetary policy of fedral reserve has remained constand0t wirh no change in interest rates the yield has been constant at 0.25% but expanded w.r.t. open market operations. , indicating low inflation and low economic growth.The fed has used open market operations of issuing and purchase of security as a key tool of monetary policy during the per as can be seen increase in securities repurchase loan increased by 2,412,342 million.so it wanted to pump money in to market to boost growth .

2.us treasury security and mortgage back securities has increased phenomenally indicating repurchase of fed to pump in money into the economy and save companies fron collspses,

3.The deposits snd fedrak reserve notes have increased on liability side as many sovereign countries have ivested in us bonds as a safe heaven.The fed printed nots by issuing securitiesand also got funding from sovereign countries like china which has huge investment in us securities.

4.The fed may likely rise the interest rate to reduce the inflation due to excess money supply in the market.

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