Liquidation of the Fed’s Balance Sheet

By: Brad Lamensdorf

The Federal Reserve’s balance sheet has begun to show the effects of the Quantitative Easing unwind.  To date, approximately $375 billion has been removed from the Federal Reserve Bank assets.  It should be noted that this reduction is a small fraction of the liquidity that was pumped into the financial system since the global financial crisis.  The removal of Fed liquidity is one key reason the credit and equity markets have become unsettled over the past two months.  The ongoing liquidation of the Fed’s balance sheet will continue to pressure equites.

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