The Federal Reserve's reserves plummet! Falling below $3 trillion, hitting a new low since 2020

The reserves of the U.S. banking system have fallen to their lowest level since October 2020, dropping below $3 trillion, which affects the Federal Reserve's decision to reduce its balance sheet. Reserves decreased by $326 billion, marking the largest weekly decline in two and a half years, primarily due to banks reducing repurchase agreement transactions at the end of the year. Wall Street strategists are paying attention to reserve levels, expecting them to be between $3 trillion and $3.25 trillion. The Federal Reserve will continue to reduce its balance sheet and adjust the RRP tool rate to alleviate downward pressure on short-term interest rates. The end date for quantitative tightening remains unclear