Fed's balance sheet swells to record $6.13 trillion

FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis

(Reuters) - The Federal Reserve’s balance sheet increased to a record $6.13 trillion this week as the central bank used its nearly unlimited buying power to soak up assets and keep markets functioning smoothly, even as efforts to contain the coronavirus pandemic cut deeply into employment and economic output.

In the four weeks since the Fed slashed interest rates to zero, restarted bond purchases and rolled out an unprecedented range of programs to limit the economic damage from the outbreak, the central bank’s balance sheet has jumped by about $1.7 trillion. Bond holdings surpassed $5 trillion for the first time.

In all, the portfolio is now the equivalent of more than a quarter of the size of the U.S. economy before the crisis struck, and will certainly grow larger in the weeks ahead as the Fed keeps piling on assets and the economy shrinks.

The central bank continued to snap up Treasury securities, mortgage bonds and other assets, according to data released on Thursday. The Fed’s holdings of mortgage-backed securities were little changed at about $1.46 trillion. Treasury holdings rose to $3.63 trillion from $3.34 trillion.

(GRAPHIC: Fed balance sheet tops $6 trillion - )

Use of the Fed’s central bank liquidity swap lines, which allow foreign central banks to exchange their local currency for dollars, rose to $358.1 billion Wednesday from $348.5 billion the previous week.

Loan balances for the Fed’s discount window, its last-resort lending program, dropped slightly to $43.45 billion on Wednesday from $43.7 billion a week ago.

Loans with the Fed’s primary dealer credit facility were little changed at $33 billion Wednesday, compared with $33.1 billion the previous week. Use of the money market mutual fund liquidity facility increased to $53.2 billion from $52.7 billion the week before.

Reporting by Dan Burns and Jonnelle Marte; Editing by Lisa Shumaker and Leslie Adler