Quantitative Easing and Tightening
The Fed balance sheet as a policy tool — what QE and QT actually do and what they don't
On August 31, 2008, the Federal Reserve's balance sheet held approximately $905 billion in total assets — roughly $475 billion of U.S. Treasury securities accumulated over decades of open market operations, plus operating assets, gold-certificate accounts, and a modest portfolio of other claims (per the Federal Reserve's H.
4.1 statistical release at federalreserve.gov/releases/h41/).
Three months later, after the Lehman bankruptcy and the launch of the first emergency lending facilities, the balance sheet had nearly doubled to roughly $2.2 trillion. By the peak of the third round of large-scale asset purchases in late 2014, total assets reached approximately $4.
5 trillion. The COVID-era expansion took the balance sheet to a peak of approximately $9.0 trillion in April 2022 — roughly ten times the pre-2008 level.
As of recent H.4.1 releases, the balance sheet has declined to approximately $7 trillion under the current quantitative-tightening cycle (started June 2022), with continued runoff at a measured pace per the FOMC's announced caps.
That is the opening. Finishing a lesson is where it stops being interesting and starts being useful: the full lesson runs to 6 sections and ends with 6 practice questions. A free account is what opens the rest, and the other 255 lessons in the Academy with it. No card.
What this lesson covers
- 1Three rounds of QE — what each was and what it tried to do
- 2QE and QT mechanics in detail
- 3Fed balance sheet trajectory — major regimes since 2008
- 4April 2022 - present — the second QT cycle and the $2 trillion balance-sheet reduction
- 5Where to see this on the platform
- 6Summary