Williams: The Federal Reserve has returned to an adequate level of reserves

Mr. Williams said that by shrinking the balance sheet, the Fed had essentially reduced the level of bank reserves to "adequate" levels. "We have now basically reached that level," Mr. Williams said of the theoretically adequate level of bank reserves, which prompted the Fed to resume bond purchases last week, or so-called "reserve management purchases". Mr. Williams noted that bank reserves had to be built up gradually as banks demanded them.