Wall Street expects the Fed to pause Treasury bill purchases this month, potentially resuming in October.

BlockBeats news, September 15 — According to the latest Federal Reserve announcement, the Fed has extended the suspension of Reserve Management Purchases (RMP) until mid-October, meaning it will not buy U.S. Treasuries for the purpose of managing banking system reserves during this period. This move indicates that the Fed currently believes the banking system's reserve levels remain relatively ample. Market analysis suggests that the pause in reserve purchases reflects the Fed's confidence in the functioning of short-term funding markets.

Recently, the Secured Overnight Financing Rate (SOFR) has mostly remained near or below the interest rate on reserve balances, and factors such as the Treasury paying down T-bills ahead of the quarterly tax deadline have also helped ease pressure in funding markets. Strategists at Wells Fargo and Bank of America expect the Fed to keep RMP purchases at zero this month and possibly resume them in mid-October to address potential pressure on funding markets after the Treasury increases its issuance of U.S. Treasuries.

Barclays strategist Samuel Earl expects the Fed's bond purchases to resume at $10 billion in October and rise further to $20 billion in November. Citigroup strategists believe the Fed may continue to suspend RMP for the remainder of the year, noting that banking system reserve balances have fallen back to a "slightly ample" level. This suspension of RMP does not mean a fundamental shift in the Fed's monetary policy stance or balance sheet strategy.