The Federal Reserve Board published a speech by Chair Jerome H. Powell reviewing how the Federal Reserve’s balance sheet was used during the pandemic, how the ample reserves implementation framework operates, and how balance sheet normalization is progressing. Powell said the Federal Reserve may be approaching the point where it will stop balance sheet runoff once reserves are somewhat above the level judged consistent with ample conditions, while emphasizing that “normalization” will not mean a return to the pre-pandemic balance sheet. Powell described the balance sheet as totaling USD 6.5 trillion in liabilities as of October 8, with roughly USD 2.4 trillion in currency, USD 3.0 trillion in reserves, and about USD 800 billion in the Treasury General Account. Assets were described as largely securities holdings, including USD 4.2 trillion in U.S. Treasury securities and USD 2.1 trillion in government-guaranteed agency mortgage-backed securities. He recapped the 2020 response, including emergency liquidity facilities that peaked at just over USD 200 billion in July 2020 and large-scale securities purchases that increased holdings by USD 4.6 trillion, and said that with hindsight asset purchases could have been stopped sooner, implying a more nimble approach may be possible in future episodes. Since June 2022, the balance sheet has shrunk by USD 2.2 trillion, from 35 percent to just under 22 percent of GDP, while maintaining rate control via administered rates; he noted emerging signs of gradual liquidity tightening, and cited the standing repo facility and the discount window as tools to contain funding pressures. He also flagged that the longer-run composition of the securities portfolio will be a Committee discussion topic, with an aim over time for a portfolio consisting primarily of Treasury securities. Looking ahead, the decision on when to stop runoff will be informed by a range of indicators in coming months, and any transition toward the desired portfolio composition is intended to be gradual and predictable.
Federal Reserve Board 2025-10-14
Federal Reserve Board Chair Powell says balance sheet runoff could stop in coming months as reserves near ample levels
Federal Reserve Chair Jerome H. Powell reviewed the Fed's balance sheet use during the pandemic and its ongoing normalization, noting USD 6.5 trillion in liabilities and USD 6.3 trillion in assets. Powell indicated the Fed may soon halt balance sheet runoff once reserves exceed ample conditions, emphasizing normalization won't revert to pre-pandemic levels. He highlighted gradual liquidity tightening and future discussions on the securities portfolio composition, aiming for a Treasury securities-focused portfolio.