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There is no fixed dollar amount that makes the Federal Reserve’s balance sheet “just right.” The Fed’s operating goal is to keep bank reserves ample: high enough that ordinary changes in reserve supply have only a modest effect on short-term interest rates, while the Fed controls rates mainly through administered rates rather than frequent, large changes in reserve supply.
The Federal Open Market Committee (FOMC) ended its securities runoff effective December 1, 2025. After judging reserves ample in December, it directed the New York Fed’s trading desk to make reserve-management purchases as needed to maintain an ample supply. That shift stopped balance-sheet shrinkage; it did not settle the ideal long-run size.
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What does the Fed’s balance sheet measure?
A balance sheet lists assets and liabilities. The Fed’s assets are dominated by securities held in its System Open Market Account, including Treasury and agency securities. Its liabilities include bank reserve balances, currency in circulation, the Treasury’s account at the Fed, and deposits held by other institutions.
Reserves are balances banks hold in accounts at the Federal Reserve. They are an asset for banks and a liability for the Fed. Because the balance sheet must balance, reserves can change even when the Fed’s securities holdings do not: for example, a change in the Treasury General Account or the amount of currency outstanding can alter other Fed liabilities and, in turn, the reserves left in the banking system.
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That is why the total balance-sheet figure alone cannot tell you whether reserves are scarce or ample. The relevant question is how the supply of reserves compares with banks’ demand for them at a given time.
What does “ample reserves” mean?
“Ample” is a range, not a published target quantity. In February 2026, Roberto Perli, head of the New York Fed’s Markets Group, described it this way: “The word ample does not refer to a specific quantity of reserves; rather, it refers to that range of reserves that makes the federal funds rate only modestly sensitive to short-term variations in reserve supply.”
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The range is not fixed because reserve demand changes. Banks hold reserves to make payments, manage liquidity, and meet regulatory requirements. Demand can also shift with economic growth, banking and payment practices, regulation, and financial stress. The Fed therefore has to assess reserve conditions over time rather than treat one total as permanently sufficient.
How does the Fed keep short-term rates on target?
In its ample-reserves framework, the Fed relies mainly on administered rates—rates it sets for specific balances and facilities—to guide short-term market rates. The main tools described by the New York Fed are:
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- Interest on reserve balances (IORB): the interest rate the Fed pays banks on reserve balances, which helps establish a benchmark for short-term lending.
- Overnight reverse repo facility: an alternative overnight investment for eligible counterparties, including money-market funds, that helps support a floor under short-term rates.
- Standing repo operations: a facility that can ease upward pressure on rates when market rates rise above the facility’s rate.
Together, these tools help keep the federal funds rate within the FOMC’s target range as liquidity conditions change. With reserves ample, the Fed does not need to fine-tune reserve supply every day to control that rate. If reserves were to become less ample, short-term rates could become more sensitive to shifts in supply, making rate control more dependent on active operations.
Why did the Fed stop shrinking its balance sheet?
The Fed began reducing its balance sheet in June 2022, after pandemic-era securities purchases had left reserves abundant. In an October 14, 2025 speech, Chair Jerome Powell said the reduction from June 2022 through October 2025 totaled $2.2 trillion, taking the balance sheet from 35 percent to just under 22 percent of GDP. In October 2025, the FOMC decided to conclude securities runoff effective December 1.
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In December 2025, the FOMC judged reserve balances to have declined to ample levels and instructed the New York Fed’s desk to begin buying shorter-term Treasury securities as needed to maintain an ample supply. This is a transition from reducing securities holdings to maintaining reserves. The decision does not declare a permanent balance-sheet target; purchases are tied to the need to keep reserves ample.
How large has the balance sheet been?
The figures below show scale at specific dates, not the balance sheet’s current size. They use different measures and should not be read as a real-time series.
| Measure | Figure | Source and qualification |
|---|---|---|
| Fed balance sheet | About $800 billion, roughly 6% of GDP, in December 2005 | Board of Governors of the Federal Reserve System, January 2026 FEDS Note; historical scale figure. |
| Fed balance sheet | Roughly $6.5 trillion, about 21% of GDP, in December 2025 | Board of Governors of the Federal Reserve System, January 2026 FEDS Note; historical scale figure. |
| Reserves, currency, and Treasury General Account | Around $2.9 trillion; $2.4 trillion; and $950 billion, respectively | New York Fed, February 12, 2026 speech; approximate figures in a stylized balance sheet, not a live reading. |
For an up-to-date balance-sheet and reserve figure, use the Federal Reserve’s weekly H.4.1 statistical release and note its release date. The Board’s guide identifies Table 5 as the consolidated balance sheet and Table 1 as the factors affecting reserve balances. H.4.1 is typically released on Thursday afternoons; the figures above should not be substituted for the latest release.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What is the tradeoff in choosing a long-run size?
A January 2026 Federal Reserve research note describes a balance-sheet “trilemma”: policymakers cannot simultaneously guarantee a small balance sheet, low short-term rate volatility, and little market intervention. A larger balance sheet can give banks a bigger liquidity buffer and help rates remain stable, but it also means a larger structural Fed presence in financial markets and may displace some private intermediation. A smaller balance sheet reduces that footprint, but if banks still demand substantial reserves, it can leave rates more exposed to supply changes or require more frequent operations.
Governor Michael S. Barr argued in a May 2026 speech that the total size alone is a poor measure of the Fed’s footprint. He cautioned that some proposals to shrink it could weaken rate control, banks’ liquidity resilience, or market functioning, and pointed to reserve demand arising from payment needs, banks’ liquidity assessments, and regulation. He also warned that removing liquidity buffers could bring back volatility like the 2019 repo-market episode. Those are Barr’s policy views, not an agreed FOMC position.
A useful way to compare proposals is to ask what each would do on four fronts:
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- Reserve supply: Would the proposal leave reserves comfortably aligned with banks’ changing demand?
- Rate control: Could administered rates still guide short-term rates without frequent intervention?
- Resilience: How would it affect banks’ liquidity management and the system’s ability to absorb shocks?
- Market footprint: Would it change the Fed’s presence in markets through the size or composition of its assets?
No single balance-sheet total answers all four questions. The appropriate steady-state size remains unsettled, and the ample range itself can move as reserve demand and other Fed liabilities change.
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