What’s Behind the Huge Spike in Reserves, a Liability On the Fed’s Balance Sheet?

by Wolf Richter
Wolf Street

The New Regime at the US Treasury Department.

The reserve balances that commercial banks have on deposit at the Fed have spiked by $1 trillion since July, and by $333 billion over the past four weeks, including $89 billion in the week through Wednesday, to a new record of $3.6 trillion. These are liabilities on the Fed’s balance sheet – money that the Fed owes the banks – and the Fed currently pays the banks 0.1% interest on those reserves. What’s behind this huge spike?

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