The Federal Reserve’s $8 trillion asset holdings continue to inject liquidity as inflation and money supply metrics reach 12-month highs.
The Federal Reserve’s $8 trillion balance sheet remains a key driver of liquidity, even as inflation gauges and money supply metrics surge. Core PCE and M2 money supply have both reached the 90th percentile of their 12-month ranges, signaling persistent price pressures.
The 10-year Treasury yield stands near 4.48%, a 12-month high, while the yield curve spread has narrowed sharply from 0.74% to 0.35% in five months. M2 money supply hit $23.05 trillion on May 1, 2026, up $0.25 trillion in a single month, reflecting a 1.1% increase.
Despite a policy rate cut to 3.75%, the Fed’s balance sheet continues to support growth, creating a disconnect between equity market complacency (VIX at 17) and bond market warnings.