The Fed's balance sheet could exceed $ 4 trillion, Reuters forecast

By Jonnelle Marte and Trevor Hunnicutt

NEW YORK (Reuters) – The US Federal Reserve 's balance sheet could be between $ 3.8 billion and $ 4.7 trillion by 2025, according to forecasts by the New York Fed.

The regional branch of the central bank, which manages massive holdings in Fed bonds, has released the projections in a report released Tuesday from surveys conducted on Wall Street traders.

The New York Fed's report showed that the Fed could start buying Treasury securities as early as 2019 or 2025, but that this decision would depend on the growth of the bank's reserves and other Fed commitments, including foreign exchange.

The Fed currently holds about $ 3.8 billion in assets, including bonds purchased to stimulate the economy after the 2008 global financial crisis.

After the crisis, the Fed increased its assets by buying Treasury bonds using the bank reserves it had created. Eventually, he started letting the bonds and reserves down to bring politics back to normal.

In July, Fed officials decided to end the liquidation of these bonds by August. They took the decision at the same time as they were cutting rates for the first time in more than a decade, citing inflation falling short of their target, the US-China trade war and other economic concerns. .

To maintain control of rates, managers will eventually have to buy bonds again and build up bank reserves.

The latest estimates are based on several scenarios of rapid growth in some parts of the Fed 's liabilities, particularly the reserves it holds for banks, currently in the range of $ 1.5 trillion.

Major investors and traders surveyed by the New York Fed have seen these reserves fall between $ 1.1 trillion and $ 1.25 trillion, before rising from $ 1.2 trillion to $ 1.5 trillion by 2025, according to the report.