The Fed reported in a weekly report Thursday that its asset holdings in the week ended March 31 edged down to $2.311 trillion, from $2.317 trillion a week earlier.
Holdings of mortgage-backed securities fell to $1.069 trillion from $1.074 trillion a week earlier. Meantime, the Fed's holdings of Treasury securities rose slightly to $776.71 billion from $776.67 billion a week earlier.
To combat a deepening recession, the Fed slashed short-term interest rates, its main lever in managing the economy, to a record low in December 2008. When that wasn't enough, it set out to inject nearly $1.75 trillion of cash into the economy by buying long-term U.S. Treasurys, mortgage securities and debt issued by mortgage firms Fannie Mae (FNM) and Freddie Mac (FRE). The purchases helped to drive down a wide range of long-term interest rates, but have left the Fed with a bloated balance sheet.
With the economy's recovery now more firmly in place, the Fed completed its mortgage-backed securities purchase program as planned at the end of March. Some Fed officials want the central bank to start selling some assets later this year, and Chairman Ben Bernanke has been more open to the possibility recently.
Thursday's report showed total discount window borrowing fell to $80.71 billion on Wednesday from $82.25 billion a week earlier. Borrowing by commercial banks through the Fed's discount window dropped to $7.51 billion on Wednesday from $8.96 billion a week earlier.
U.S. government securities held in custody on behalf of foreign official accounts rose to $3.025 trillion from $3.014 trillion in the previous week.
U.S. Treasury securities held in custody on behalf of foreign official accounts as of Wednesday edged higher to $2.244 trillion from $2.241 trillion in the previous week.
Holdings of agency securities increased to $780.85 billion from the prior week's $773.24 billion.
The Fed release was modified slightly to incorporate fair value adjustments associated with the Term Asset-Backed Securities Loan Facility, or TALF, an emergency lending facility the Fed is due to end by June.
Further data on the Fed's balance sheet, including a breakdown of district-by-district discount window borrowing, can be found at: http://www.federalreserve.gov/releases/h41/Current/h41.pdf.
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