Judging scarcity of reserves depends on Treasuries outstanding – paper

New York skyscrapers and flag

The scarcity of reserves can only be judged in relation to the amount of outstanding short-term Treasuries, research published by the Federal Reserve Bank of New York finds.

Normally, an increase in reserves would be associated with a decline in money market rates because of an increase in bank balance sheet costs. But despite the large increase in reserves since September last year, money market rates have remained relatively firm over the period.

The four authors examine whether this

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