🏛️ Is the Fed About to Pause QT? Here's What the Data Shows

As the FOMC meets Thursday, focus is on a potential 25bps cut and whether the Fed will signal an end to quantitative tightening after years of draining liquidity.

Powell at NABE: "Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions." With reserves below $3T and reserve-to-asset ratio at 12%, early warning signs are flashing.

5 Key Indicators:
1️⃣ Reserve-to-Assets Ratio: Now ~12% after sharp drop from 2022 peaks. Fiscal bill issuance accelerating the drain—echoing pre-2019 tensions. 2️⃣ SOFR-IORB Spread: Just flipped positive for the first time in years, aligning with reserve declines—watch for widening.

3️⃣ ON RRP vs ON RP: ON RRP balances depleting while ON RP ticks up—first hints of need. Market's not desperate yet, but the shift merits monitoring.