Fed Halts Reserve-Management Purchases, Expects Looser Funding Conditions

The Federal Reserve has unexpectedly suspended its reserve-management purchases, a move that caught Wall Street strategists off guard. The New York Fed announced on August 13 that for the one-month operating period through September 14, it will conduct no reserve-management purchases aimed at managing banking-system reserves.

This marks the first time monthly purchases have dropped to zero since the program's inception in December 2025. The prevailing market expectation had been that the Fed would maintain monthly reserve-management purchases at around $10 billion. According to New York Fed data, this represents a significant reduction from the previous month when both reserve-management and reinvestment purchases were scheduled.

Bank of America strategists Mark Cabana and Katie Craig said in a client note that the reduction to zero indicates the Fed has taken note of 'persistently loose funding conditions.' They currently expect the purchase schedule announced in September to remain at zero, with the remainder of 2026 potentially seeing a return to roughly $10 billion per month.

TD Securities, however, believes the suspension is more of a pause than a permanent halt. The firm's head of U.S. rates strategy, Gennadiy Goldberg, expects the zero-purchase state to persist until mid-November, after which the Fed may resume purchases at an initial pace of roughly $5 billion to $10 billion per month.

Goldberg noted that this suspension is not a precursor to quantitative tightening and that the Fed currently holds a buffer above its minimum comfortable reserve level. This allows it to temporarily stop purchases and let reserves decline naturally over time, before resuming smaller-scale purchases.