Moneycontrol

Budget 2021

Associate Partners:

  • SMC
  • Samsung
  • Volvo

Moneycontrol

Budget 2021

Associate Partners:

  • SMCSamsungVolvo
Webinar :Join an expert panel for a webinar on Smart investments for a secure retirement January 28, 2021. Register now!
you are here: HomeNewsWorld

Fed balance sheet tops $5 trillion for first time as it enters coronavirus war mode

The Fed's total balance sheet size exploded by more than half a trillion dollars in a single week, roughly twice the pace of the next-largest weekly expansion in the financial crisis in October 2008. As of Wednesday, the Fed's stash of assets totalled $5.3 trillion, according to data released on Thursday.

March 27, 2020 / 08:40 AM IST

The US Federal Reserve's balance sheet soared past $5 trillion (4.1 trillion pounds) in assets for the first time this week as it scooped up bonds and extended loans to banks, mutual funds and other central banks in its unprecedented effort to backstop the economy in the face of the global coronavirus pandemic.

The Fed's total balance sheet size exploded by more than half a trillion dollars in a single week, roughly twice the pace of the next-largest weekly expansion in the financial crisis in October 2008. As of Wednesday, the Fed's stash of assets totalled $5.3 trillion, according to data released on Thursday.

The Fed bought $355 billion of Treasuries and mortgage-backed bonds in the last week in what is now an open-ended commitment to stabilise financial markets rocked by the outbreak and the halt in economic activity that has come in its wake.

It also offered more than $200 billion in credit through so-called foreign currency swap lines to other central banks to allow them to pump much-needed greenbacks into their jurisdictions to help foreign borrowers stay current with their dollar-denominated liabilities.

The weekly snapshot of the Fed's balance sheet, released each Thursday, also showed sizable demand for a pair of brand new liquidity facilities aimed at stabilizing money markets and supporting primary dealers, the banks that transact directly with the central bank.

Close

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more
Show

The new Primary Dealer Credit Facility had been tapped for $27.7 billion in loans as of Wednesday, while the Money Market Mutual Fund Liquidity Facility had borrowings of $30.6 billion.

Banks continued to line up for loans directly from the Fed at its so-called Discount Window, long stigmatized as the source of last resort for weak banks to get cash. The Fed is trying to ease that stigma and has encouraged banks to use the facility more liberally.

As of Wednesday, those borrowings were up to $50.8 billion from $28.2 billion the previous week.

On Thursday, Fed Chair Jerome Powell pledged the Fed would lend "aggressively" to thwart the outbreak's damage to the economy.

The number of Americans seeking unemployment benefits for the first time shot to a record 3.3 million last week. Tens of millions of Americans are in some form of isolation and thousands of businesses across the country have closed temporarily to contain the virus' spread.
Reuters
first published: Mar 27, 2020 08:30 am

stay updated

Get Daily News on your Browser
Sections