Emergency lending to banks boosted overall Fed holdings, size of balance sheet
23.03.2023, 22:20

Emergency lending to banks boosted overall Fed holdings, size of balance sheet

Late Thursday, Reuters reported that Federal Reserve emergency lending to banks, which hit record levels the last week, remained high in the latest week, amid continued large scale extensions of credit to the financial system, which now includes official foreign borrowing.

“Borrowing from the Fed caused the size of its overall balance sheet to move to $8.8 trillion from $8.7 trillion the prior week,”

Additional quotes

The Fed reported that discount window borrowing, its main source of emergency credit to depository institutions, ticked down to $110.2 billion as of Wednesday, from the $152.9 billion reported last week.

Last week's level had surged from $4.6 billion on March 8, shredding the $112 billion record set during the fall of 2008, during the global financial crisis’s most perilous phase.

The Fed also reported lending to foreign central banks and monetary authorities went from nothing on March 15 to $60 billion on Wednesday. Several major central banks announced recently they would draw on Fed dollar liquidity as needed.

Last week's increase set back the Fed’s work since last summer to reduce the size of its stockpile of cash and bonds that topped out at just shy of $9 trillion during the summer, a development the Fed views as having no implications for monetary policy.

Fed data also showed the $142.8 billion in credit it had extended to the Federal Deposit Insurance Corporation (FDIC) to deal with the failed California banks rose further and stood at $179.8 billion.

Market reaction

The news increase market’s fears of more Fed rate hikes and banking crisis, which in turn could be linked to the latest rebound in the US Treasury bond yields and the US Dollar from the recent troughs.

Also read: Forex Today: The Dollar says hello as Wall Street’s rally fades

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