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MARCH 8
The fight against the pandemic has left a large imprint on the US Federal Reserve's balance sheet. Since the outbreak of the pandemic in early 2020, the US Fed has purchased a wide range of assets and pumped liquidity into the financial system to cushion the impact of the pandemic and fiscal stimulus on interest rates. Its balance sheet ballooned to nearly $9 trillion, compared with the pre-pandemic level of $4 trillion.
To put this number in perspective, the added $5 trillion in the US Fed's assets is roughly the same size of total overseas claims by Asian banking systems. With the extraordinary fiscal and monetary policy support, the US economy has staged a strong recovery since 2020 Q3.
The economy grew 5.7% in 2021, which is the highest annual growth since 1984. Domestic demand has been rising even faster. By any measure, the US economy now runs on its full capacity.
Unemployment rate fell to 4% and inflation climbed to 7.5%. This prompts the Fed to begin contemplating the path to normalize its monetary policy. - blog.adb.org/blogs
A version of this article appears in the print on March 9, 2022, of The Himalayan Times.
