The outlook for the Federal Reserve’s balance sheet is “highly uncertain” given the economic deterioration caused by the coronavirus pandemic, the New York Fed said in a report released on Monday.
Prior to the pandemic, the New York Fed’s projections had the balance sheet rising to $6.3 trillion under a baseline scenario. However, the Fed’s balance sheet last month grew to $6.7 trillion as the central bank bought assets to stabilize financial markets and cushion the economy from being devastated by the pandemic.
The Fed has introduced a slew of emergency lending facilities since March and conducted open-ended bond purchases to help keep credit flowing to households and businesses. As a result of those programs, the balance sheet could swell to $10 trillion this year, according to economists polled by Reuters.