US banking system reserves have fallen below $3 trillion, the lowest level since October 2020, and reserves fell by about $326 billion in the week ending January 1, the largest weekly decline in more than two and a half years.
Bank reserves fell by $326 billion in the week ended Jan. 1 to $2.89 trillion, according to Federal Reserve data released Thursday. That’s the biggest weekly decline in more than two and a half years.
The decline comes as year-end dynamics force banks to scale back balance-sheet-intensive activities like repurchase agreements to shore up their books for regulatory purposes. That means directing cash to places like the central bank’s overnight reverse repo facility, which drains liquidity from other liabilities on the Fed’s book.
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