📝Fed's QT Could Halt By 1Q 2023: Deutsche Bank

Estimate the Fed’s lowest comfortable level of reserves to be around $2.1 trillion, but given the central bank’s desire to leave a buffer, QT will slow down at $2.75 trillion and stop at $2.5 trillion until reserves hit a maintenance level of $2.3 trillion, expected to stop by the first quarter of next year.

The impact of the Standing Repo Facility is likely small, only reducing minimum reserve demand by $200 billion, given unclear guidance about assumed access to the facility in intraday liquidity and resolution planning, as well as smaller bank reluctance to invest in triparty infrastructure necessary to access the facility. Scarcity is likely to manifest through higher bank funding rates, which involve more flexible elasticities, lifting a broad range of bank funding rates over time. Reserves have so much room to go before The Fed is done. - Deutsche Bank