LIQUIDITY WATCH. ACROSS-THE-BOARD DECLINES!
. Federal Reserve: "Factors Affecting Reserve Balances", February 13
- Fed's Treasuries holdings: $75530bn (-$2.2bn)
- Other central banks' Treasuries holdings: $1,266.7bn (-$0.5bn) (*)
- Other central banks' agency securities: $846.2 (-$4.2bn) (*)
- Global Dollar Liquidity Measure: $2,822.0bn (-$6.9bn)
(*) Off-balance-sheet items
The weekly Fed balance sheet shows modest, but across-the-board declines. All components of the Global Dollar Liquidity measure are down: the Fed's own stock of Treasury securities, foreign central banks holdings of Treasuries, and foreign central banks holdings of agency securities. This is a very rare occurrence indeed! Most striking of all, the "domestic" (*) component is now down for two months in a row. The last time we had back-to-back contractions in this proxy of the monetary base was in ... December 2000/January 2001!
(*) Strictly speaking, the adjective "domestic" is a bit of a misnomer here. The Fed destroys liquidity whenever it defends a target for the fed funds rate that is too high relative to the demand for bank reserves. The weakness in the demand for bank reserves, in turn, may reflect both domestic and international factors.