#Fed #USBankDeposits #FinancialMarkets #EconomicData #BankingSector #SeasonalAdjustments #EquityMarkets #LiquidityBoost
In recent weeks, the Federal Reserve’s handling of the US banking sector’s deposit adjustments has sparked notable interest, especially considering the $173 billion disparity over the last three weeks. This period has seen a mix of outcomes with total US bank deposits experiencing a rise of $16.7 billion last week on a seasonally-adjusted basis, according to data from Bloomberg. This marks the third consecutive week of increases, presenting an intriguing picture of the current financial landscape. On the flip side, there’s been a steady decline in total deposits on a non-seasonally-adjusted basis, falling by $55.7 billion back to near two-month lows, signaling a volatile undercurrent in these financial metrics.
The story of US bank deposits is more nuanced when breaking it down between domestic and foreign deposits. For three straight weeks, there have been inflows and outflows in domestic deposits, seasonally adjusted (SA) and not seasonally adjusted (NSA) respectively. Specifically, last week observed NSA outflows of $53 billion being transformed into $26 billion of SA inflows, evidencing a significant makeover of deposit flows once adjustments are made. This transformation involved both large and small banks, with figures oscillating between inflows and outflows, culminating in a cumulative rise of $89 billion in SA domestic deposits versus an $84 billion fall on an NSA basis over the past three weeks.
This discrepancy, totaling a staggering $173 billion, raises eyebrows, especially considering the federal’s trepid handling of the financial markets. Despite the complexity of these financial maneuvers, which may seem baffling to those without a PhD, the underlying concern is the real impact on the banking sector and the broader economy. As loan volumes continue to increase for the fourth consecutive week, the crucial question remains: How will these adjustments affect the liquidity and stability of US banks and, by extension, the equity markets which are already showing signs of decline? This situation warrants close monitoring as it unfolds, potentially prompting a strategic response from the Fed, especially concerning liquidity boosts to curb market volatility.
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