Summary of Speech by President Lorie Logan

Introduction

On September 25, 2025, Dallas Fed President Lorie K. Logan delivered a speech at the Federal Reserve Bank of Richmond's CORE Week Workshop: The Feds Balance Sheet. In this summary, we will outline the key points and takeaways from her remarks.

Overview of the Federal Reserve's Balance Sheet

President Logan began by explaining that the Federal Reserve's balance sheet is a critical component of its monetary policy tools. The balance sheet consists of two main components: the assets side and the liabilities side.

Assets Side

The assets side includes:

• Federal Reserve Bank notes: The Fed holds $1.7 trillion in federal reserve bank notes, which are essentially IOUs from banks to the Fed.
• Reserve balances: Banks hold reserves with the Fed, which can be used to make loans or pay bills. At $2.4 trillion, reserve balances represent about 40% of the total Fed assets.
• Securities: The Fed invests a portion of its portfolio in government securities, such as U.S. Treasury bonds and agency debt.

Liabilities Side

The liabilities side includes:

• Bank reserves: Banks hold federal reserve bank notes and checkable deposits with the Fed.
• Federal Reserve Bank notes: The Fed also holds federal reserve bank notes, which can be used to make loans or pay bills.

Implications of the Balance Sheet for Monetary Policy

President Logan emphasized that the balance sheet plays a crucial role in the Fed's ability to implement monetary policy. By adjusting its balance sheet, the Fed can influence interest rates and the overall level of economic activity.

Expansionary Monetary Policy

During times of economic stress, the Fed can expand its balance sheet by purchasing securities or lending directly to banks. This injects liquidity into the economy, reduces interest rates, and encourages borrowing and spending.

Contractionary Monetary Policy

In contrast, during periods of strong economic growth, the Fed can contract its balance sheet by selling securities or reducing lending. This reduces the money supply, increases interest rates, and slows down economic activity.

Risks Associated with the Balance Sheet

President Logan also discussed some potential risks associated with the balance sheet. These include:

• Asset price inflation: The value of assets on the balance sheet can increase rapidly during times of expansionary monetary policy, leading to asset price inflation.
• Liability mismatch: If the Fed's liabilities are not matched by its assets, it may face difficulties in meeting its obligations.

Conclusion

In conclusion, President Logan emphasized that the Federal Reserve's balance sheet is a critical component of its monetary policy tools. By understanding how the balance sheet works and how it can be used to implement expansionary or contractionary policies, policymakers can better manage economic activity.

Sources

• Federal Reserve Bank of Richmond
• Dallas Fed

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