According to BlockBeats, the level of bank reserves in the United States has become a crucial factor in the Federal Reserve's decision to continue reducing its balance sheet. Data released by the Federal Reserve on Thursday indicates that bank reserves fell by approximately $59 billion in the week ending October 22, reaching $2.93 trillion. This marks the lowest level since the week of January 1.
Following the increase in the debt ceiling in July, the U.S. Treasury has intensified debt issuance to rebuild its cash balance. This action has drained liquidity from other liabilities on the Federal Reserve's balance sheet, such as the overnight reverse repurchase agreement (ON-RRP) tool and bank reserves. Currently, with the ON-RRP tool nearly depleted, commercial bank reserves held at the Federal Reserve have been declining.
Strategists from JPMorgan Chase, Bank of America, TD Securities, and Wrightson anticipate that the Federal Reserve will halt the reduction of its approximately $6.6 trillion balance sheet this month.