Monday, June 13, 2011

Some More Data on Reserve Balances

A previous post ("Some Comments on Paul Krugman and Monetary and Fiscal Stimulus") discussed the increase in holdings of Treasury notes and bonds from September 29, 2010 to June 1, 2011. It should be pointed out that some other factors served to drain reserves from the banking system. For example, the Fed's holdings of mortgage backed securities (Fannies, Freddies, and Ginnies) fell by about $161 billion. One assumes this was largely due to the paydown of principal on the underlying mortgages. Given a host of factors, the reserve balances of depository institutions held at the Fed increased by about $609 billion from September 29 to June 1. While this is less than the $721 billion increase in the Fed's outright holdings of Treasury bills, notes, and bonds over the period (the Fed's holdings of bills did not change), it is still a huge increase in reserves. (Data from Federal Reserve Statistical Release H.4.1.)

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