Fed Holds Pause on Reserve Purchases for Second Month

The Federal Reserve has chosen to maintain its pause in reserve management purchases (RMP) for a second consecutive month. This decision indicates that policymakers believe banking system liquidity remains ample and short-term funding markets require no additional support.

As of September 9, U.S. banking system reserve balances stood at $3.04 trillion, exceeding the year-to-date daily average of $3.01 trillion. The Fed has emphasized in its policy communications that this pause does not represent any shift in monetary policy stance or balance sheet strategy.

Strategists at major financial institutions have offered differing assessments of when the RMP might resume. Wells Fargo and Bank of America expect purchases to rebound as Treasury issuance increases, while Barclays predicts a $10 billion rebound in October and expansion to $20 billion in November. Citigroup, however, believes the Fed could extend the pause through year-end.