Important security note: Warning of attempted fraud in the name of DWS
We have detected that fraudulent individuals are misusing the "DWS" trademark and the names of DWS employees on the internet and social media. These fraudsters are operating fake websites, Facebook pages, WhatsApp groups and Mobile Apps. Please be aware that DWS does not have any Facebook Ambassador profiles or WhatsApp chats. If you receive any unexpected calls, messages, or emails claiming to be from DWS, exercise caution and do not make any payments or disclose personal information. We encourage you to report any suspicious activity to info@dws.com, including any relevant documents and the original fraudulent email. Additionally, if you believe you have been a victim of fraud, please notify your local authorities and take steps to protect yourself.
Does the Fed’s balance sheet have a price tag?
20/02/2026
Even a quieter, less interventionist Fed would only shrink its footprint very cautiously. Partly this reflects changes to the financial plumbing in recent decades.
Will there be “regime change” at the U.S. Federal Reserve (Fed)? Fed chair nominee Kevin Warsh has repeatedly raised that prospect.[1] But assuming Warsh is eventually confirmed, what matters for investors is less the slogan than the mechanics of the balance sheet.
Our Chart of the Week compares the Fed’s holdings of U.S. Treasuries as a share of the total market with the U.S. consumer price index (CPI). Big upward steps in the Fed’s footprint tended to coincide with periods when inflation later became a bigger problem - most clearly in the 1970s and again after the pandemic. That does not mean the balance sheet “causes” every spike. But it is a tool that can amplify what fiscal policy and supply shocks have already set in motion.
That’s why markets are paying attention to Fed chair nominee Kevin Warsh, a longtime critic of quantitative easing (QE) and balance-sheet expansion beyond what is needed to overcome a financial crisis. But as Christian Scherrmann, Chief U.S. Economist at DWS, cautions, past statements do not justify drawing quick conclusions about policy shifts ahead. Partly this reflects changes to the financial plumbing of the U.S. economy in recent decades.
Large‑scale bond buying during previous crises meant that the Fed bought government bonds, as well as some other securities, and expanded its balance sheet through market purchases. The result is more bank reserves in the system. By taking bonds out of private portfolios, the Fed may push down longer‑term yields. That could loosen borrowing conditions beyond the policy rate, supporting lending, asset prices and spending. If economy-wide demand is already strong and supply is constrained, that extra demand is more likely to raise prices than output.
Currently, the Fed holds about $4.29tn of Treasuries - roughly 14% of marketable debt - and headline CPI inflation is 2.4% year-on-year. “Under Warsh, we might well see a more focused Fed, relying less, for example, on forward guidance,” argues Christian Scherrmann. “But any changes are still likely to be incremental rather than revolutionary.” In coming months, we think, the Fed will likely stay in wait‑and‑see mode until inflation has fully digested the impact of tariffs. In the longer term, we would expect it to remain as cautious as circumstances allow with its balance sheet – precisely because using this tool can have large consequences – often in unpredictable ways, and with a lag that is hard to pin down.
How the Fed’s Treasury holdings relate to consumer price inflation
Sources: Bloomberg Finance L.P., DWS Investment GmbH as of 2/17/26
This information is subject to change at any time, based upon economic, market and other considerations and should not be construed as a recommendation. Past performance is not indicative of future returns. Forecasts are based on assumptions, estimates, opinions and hypothetical models that may prove to be incorrect.