Is the Fed monetising the deficit?

The scale of the Fed’s purchases of Treasury securities in the first few weeks of the pandemic, in addition to the sheer size of the broader expansion in its balance sheet, arguably suggests that the Fed is not just monetising the deficit, but has unleashed a full-blown helicopter money drop. As the crisis develops over the next few months, however, we suspect the Fed will continue to reduce the pace of its Treasury securities purchases, while the fixed-term loans it is making to the private sector do not represent a permanent increase in the money supply, which is the distinguishing feature of helicopter money.