The decline in reserves in the U.S. banking industry provides a basis for the Federal Reserve to end QT

ChainCatcher News, the reserves of the U.S. banking system are a key factor in the Federal Reserve's decision to continue reducing its balance sheet. According to data released by the Federal Reserve on Thursday, bank reserves fell by about $59 billion to $2.93 trillion. This is the lowest level since the week of January 1.

After the debt ceiling was raised in July, the U.S. Treasury increased its 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 tool and bank reserves. Today, as the so-called ON-RRP (overnight reverse repurchase agreement) tool is nearly emptied, the reserves held by commercial banks at the Federal Reserve have been declining. Strategists at JPMorgan, Bank of America, as well as TD Securities and Wrightson expect the Federal Reserve to stop reducing its approximately $6.6 trillion balance sheet this month.