Deflating QT cushion may have raised red Fed flag

Speaking up: Bostic during an interview session with the press. The Fed has been soaking up what he once described as pure excess liquidity, via its daily reverse securities repurchase facility. — Bloomberg

ANY real economy crunch from the US Federal Reserve’s (Fed) balance sheet rundown may have been softened to date, but the air is rapidly escaping from one of its key cushions.

Whether last week’s rhetorical shift by the Fed acknowledges this potential crunch is an open question, but credit and liquidity watchers are calling time on how long 2023’s commercial bank reserves at the Fed can remain so stable.