Definition
Total financial assets held by the Federal Reserve (WALCL), including Treasuries and MBS. Expansion = more liquidity; contraction = less.
The Fed balance sheet peaked at $8.9T in early 2022 after COVID-era QE and has since shrunk through QT. It is updated weekly every Thursday. Changes in the balance sheet directly affect bank reserves, which are the foundation of the financial system's liquidity. The indicator is part of the Policy/Reserves tier (30% weight) in the DLI model and uses the WALCL series from FRED.