U.S. banking system reserves have dropped below $3 trillion.

The reserves of the US banking system, which are a key factor in the Federal Reserve's decision regarding further reductions in its balance sheet, have fallen below $3 trillion, marking the lowest level since October 2020.

This is reported by Bloomberg.

According to the Fed, bank reserves decreased by approximately $326 billion in the week leading up to January 1, reaching $2.89 trillion.

This decline is attributed to banks reducing active operations, particularly repos, at the end of the year to strengthen their balances in line with regulatory requirements. This results in a shift of funds into the central bank's overnight reverse repo mechanism, which reduces the liquidity of other liabilities on the Fed's balance sheet. Balances in the RRP account increased by $375 billion from December 20 to December 31, and then fell by $234 billion on Thursday.

Additionally, the Fed continues to withdraw excess cash from the financial system through its quantitative easing program, while banks gradually repay loans from the Bank Term Funding Program.

American policymakers and Wall Street strategists are closely monitoring the comfortable minimum level of reserves, which is estimated to be between $3 trillion and $3.25 trillion, including a buffer.

Background. Earlier, Mind reported that the US wants to ban the import of drones made by "foreign adversaries." The government believes that drones from China and Russia may provide the capability for remote access and manipulation of these devices.