The decline in US banking reserves provides a basis for the Federal Reserve to end QT
2025-10-23 21:33:12
The reserves of the US banking system, a key factor in the Fed's decision to continue shrinking its balance sheet, fell by about $59 billion to $2.93 trillion in the week ending Oct. 22, according to data released by the central bank on Thursday. That was the lowest level since the week of Jan. 1. The US Treasury ramped up debt issuance to rebuild its cash balance after the debt ceiling was raised in July, which drains liquidity from other liabilities on the Fed's books, such as its overnight reverse repurchase agreement facility and bank reserves. Now, with the so-called ON-RRP (overnight reverse repurchase agreement) facility all but emptied, commercial bank reserves held at the Fed have been falling. JPMorgan Chase, Bank of America and strategists at TD Securities and Wrightson all expect the Fed to stop shrinking its balance sheet by about $6.60 trillion this month.
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