y comparison, the Federal Reserve only increased its holdings of Treasury notes and bonds by $116 billion, or roughly 25 percent, between December 5, 2007 and June 24, 2009 (a period known as the Great Recession). Over that same period, the Federal Reserve expanded its total portfolio from $920 billion in December 2007 to $2.1 trillion in June 2009, a total increase of $1.2 trillion. Much of that increase stemmed from the purchase of mortgage-backed securities and the implementation of new programs to address the economic slowdown.

The Federal Reserve’s purchases of longer-term Treasury securities over the past two years was part of their effort to support the economy through quantitative easing. Those purchases injected money into the economy to reduce longer-term interest rates and therefore encourage lending and investment. Such efforts by the Federal Reserve helped mitigate the economic fallout from the pandemic along with spending on safety net programs such as unemployment compensation and other programs created to provide aid to sectors of the economy hit hardest by the pandemic.

On June 1, 2022, the Federal Reserve initiated the process of reducing the size of its balance sheet to address rising inflation. According to a May press release, the Fed will initially cap its monthly purchase of Treasury securities at $30 billion for June, July and August – for context, the Federal Reserve purchased an average of $80 billion in Treasury securities per month between March 2020 and March 2022. The cap is set to increase to $60 billion in September and will likely remain at that level through the end of calendar year 2023. The Federal Reserve will also reduce its holdings of mortgage-backed securities over the coming months.

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