๐ฆ๐ Fed Balance Sheet Update: Year-End Liquidity Normalizes๐
The Federal Reserveโs balance sheet contracted by $67B this week, bringing total assets down to $6.57 trillion. This move was widely expected and marks the unwinding of temporary year-end liquidity operations.
๐ What changed?
Standing Repo Facility (SRF):
๐ฅ Dropped from $75B โ $0
The entire decline came from the SRF, which saw heavy usage on Dec 31 (year-end funding stress), then quickly rolled off by Jan 5.
Reserve Management Purchases:
โ +$8B, slightly offsetting the decline.
๐ Why the big swing?
December 31 is the peak of year-end balance-sheet stress, when banks tap short-term liquidity. The $75B SRF spike inflated the Fedโs balance sheet for just one reporting week, and has now been fully reversed.
๐ง Key takeaway:
This is not QT acceleration or policy tightening. Itโs simply temporary liquidity support being withdrawn as markets return to normal post year-end.
๐ Bottom line:
โ Liquidity stress has eased
โ Emergency repo usage normalized
โ Fed balance sheet volatility was technical, not structural
#FederalReserve #Liquidity #RepoMarket #Macro #MonetaryPolicy #FedWatch ๐๐ก$BTC
