• The Federal Reserve’s balance sheet expanded by $297 billion to $8.63 trillion in the week of March 15, reaching the highest value since November.
• Observers say that this expansion is not outrightly stimulative like the one seen following the coronavirus-induced crash of 2020, and is instead due to banks borrowing short-term loans from the central bank to cope with a crisis of confidence.
• Market strategist Marc Chandler has said that “QE is increasing the balance sheet for monetary purposes” and all expansion of the balance sheet is not QE.
Federal Reserve’s Balance Sheet Expansion
The U.S. Federal Reserve’s balance sheet expanded by $297 billion to $8.63 trillion in the week of March 15, reaching the highest value since November. Some observers have noted that this expansion is not outrightly stimulative like the one seen following the coronavirus-induced crash of 2020, and instead stemmed mainly from banks borrowing short-term loans from the central bank to cope with a crisis of confidence triggered by three U.S. banks collapsing, including Silicon Valley Bank.
Quantitative Easing (QE)
Some on Crypto Twitter have suggested that this increase in balance sheets could be seen as Quantitative Easing (QE), which involves buying assets such as government bonds and mortgage-backed securities to inject liquidity into financial systems and stimulate asset prices – including cryptocurrencies – after 2008 crashes or pandemics such as COVID-19 in 2020.
Marc Chandler on QE
However, market strategist Marc Chandler has said that “QE is increasing the balance sheet for monetary purposes” and all expansion of the balance sheet is not QE; it may be used for financial stability rather than stimulus purposes alone. Institutions can also tap into Fed’s discount window during emergencies for liquidity needs or when faced with a shortage of funds or capital resources at other institutions.
Bitcoin & Inflation
Alex Thorn, head of firmwide research at Galaxy will be speaking about “Bitcoin & Inflation: It’s Complicated” at Consensus 2023 where he will share his insights on how Bitcoin affects inflation differently compared to traditional methods such as quantitative easing employed by central banks around world today.
Conclusion
The recent increase in Federal Reserve’s balance sheets may not necessarily suggest quantitative easing but could be related more towards providing financial stability during times like these with increased demand for loans due to economic downturns caused by pandemics such as COVID-19 etc., rather than being an outright stimulative move like it was during last year’s pandemic crisis situation..