#CreatorPad

The Fed is losing control over liquidity: RRP almost empty, the next step — bank reserves

📉 The volume of funds in the Fed's reverse repo (RRP) has decreased to $28.8 billion — the lowest since 2021. In two weeks, $185 billion has vanished as investors move into short-term bonds that the Treasury is issuing en masse to replenish the budget.

🇺🇸 If the trend continues, the Fed will have to draw liquidity from bank reserves (currently $3.3 trillion). However, a drop below $2.7 trillion poses risks to the stability of the entire financial system.

❗️ To avoid a liquidity crunch, the Fed may be forced to initiate emergency injections through special instruments — effectively turning on the "printing press".

🔥 If such a step coincides with the anticipated rate cut in September, the effect will be doubled: it will fuel high-risk assets — cryptocurrencies, growth stocks, and the tech sector.

The Fed is balancing between tight policy and the risk of systemic failures. Even without a rate cut, the launch of liquidity support programs will signal to the market that cheap money is returning. The first to feel this will be cryptocurrencies and risky assets, especially with the Fed's readiness to rescue the market.