The Federal Reserve’s balance sheet shrank for the second time in two weeks as central banks reduced their use of currency swaps while US banks continued to cut their use of Fed repurchase agreements.
From $7.14 trillion a week earlier, Fed’s balance sheet deflated to $7.13 trillion on June 24 as reflected by the data released by the central bank on Thursday. Fed’s balance sheet size is composed of assets ranging from U.S. Treasury bonds and mortgage-laden securities to loans to banks and state governments.
Aside from the asset figures, the data also reflected that the Fed has yet to extend any credit under its Main Street Lending Program which was specifically schemed to aid small to medium-sized businesses amid the coronavirus crisis.
A week ago, the Fed balance shrank for the first time since February that pointed at large cuts in foreign exchange swaps with other central banks. The same culprit is responsible for the second consecutive decline of the Fed’s assets.
More so, the balance outstanding was seen falling at its lowest level since March 25 at under $275 billion from $352.4 billion in the previous week.