Principal Payments on the Federal Reserve's Securities Holdings

Abstract

As noted in the Policy Normalization Principles and Plans issued in September 2014, when the Federal Open Market Committee (FOMC) judges that it is appropriate to begin the process of normalizing the size of the balance sheet, it intends to gradually reduce the Federal Reserve's holdings of Treasury securities and agency debt and agency mortgage-backed securities (MBS). In a June 2017 addendum to the Policy Normalization Principles and Plans, the FOMC provided more information describing how it will decrease the reinvestment of principal payments received on the securities held in the System Open Market Account (SOMA). This note provides data sources for information on current SOMA holdings and offers background information to help understand how principal payments on SOMA securities combined with a change in reinvestment policy will reduce these holdings.

Keywords: Federal Reserve, monetary policy

JEL Classification: E5