Week InReview: March 29, 2024

Fed piloting another tricky soft-landing

The Fed is close to delivering a rare soft landing for the US economy but it faces yet another fraught challenge: reducing cash in the financial system without disrupting markets. With the Fed having already removed some $1.4 trillion as it shrinks its balance sheet to end pandemic-era support, the focus is increasingly turning to when it should stop. The worry is that if cash in the banking system, called reserves, breaches a certain minimum level, markets will freeze up. But no one knows what the right level is. (Reuters | Mar 28) see also Fed's operating losses swelled to a record $114.3 billion in 2023 (Bloomberg Economics - Central Banks | Mar 26)

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