U.S. bank reserves decline, providing grounds for the Federal Reserve to end QT

Jinse Finance reported that the level of bank reserves in the United States is a key factor for the Federal Reserve's decision to continue shrinking its balance sheet. According to data released by the Federal Reserve on Thursday, bank reserves fell by about $5.9 billion in the week ending October 22, dropping to $2.93 trillion. This is the lowest level since the week of January 1. After the U.S. Treasury raised the debt ceiling in July, it increased debt issuance to rebuild its cash balance, which draws liquidity from other liabilities on the Federal Reserve's books, such as the Fed's overnight reverse repurchase agreement (ON-RRP) tool and bank reserves. Now, with the so-called ON-RRP tool nearly emptied, commercial bank reserves held at the Fed have continued to decline. Strategists from JPMorgan, Bank of America, as well as TD Securities and Wrightson all expect the Federal Reserve to stop shrinking its approximately $6.6 trillion balance sheet this month.