In 2006, the dominant liability was currency held by the public, and the dominant asset was Treasury securities. The Fed’s asset purchase programs increased the balance sheet from just below 6 percent to nearly 25 percent of GDP by the end of 2014. 2 Balance sheets must balance, of course, and the Fed issued reserves as payment for the assets purchased.
This action pushed reserves to nearly 15 percent of GDP. The Committee has long said that the size of the balance sheet will be considered normalized when the balance sheet is once again at the smallest level consistent with conducting monetary policy efficiently and effectively.