After declining since late December, the Fed balance sheet (Reserve Bank Credit) expanded for the first time this year, by $76.9 billion to $1,907.3 billion in the week to February 18 . If you look at the details, Commercial paper funding facility and Central bank liquidity swaps continued to contract as falling commercial paper and LIBOR interest rates makes Fed funding in those areas less attractive. Term auction credit and Securities held outright however expanded a lot more, causing total Reserve Bank Credit to expand.The increase in "Securities held outright" was not due to increased holdings of Treasuries ( yet ). Instead it meant increased holdings of mortgage backed securities. Right now, the Fed focuses on bringing down mortgage interest rates by buying such securities.If this is not an aberration, and instead is the beginning of a trend with expanded or at least stabilized Reserve Bank Credit, this will enable money supply growth to remain high. M2 and MZM continued to expand the latest week , and will probably continue to do so. That in turn means that price inflation will likely pick up again soon, something which we are already seeing in the price of gold. Other commodities that are more dependent on industrial demand will have more difficulty to rally until China and other economies pick up.