This matters more than today’s jobs report or the inflation data when it comes to the Fed’s monetary policy decisions – Powell & Co. have painted themselves into a corner and the only way out is money printer go brrr:
Wow, looks pretty scary! But in a period that encompasses rapid price and real GDP growth, maybe we should normalize by nominal GDP….
Figure 1: Reserve balances held with Federal Reserve Banks, end of quarter month, average of weekly data, normalized by GDP. Q3 is normalized by Survey of Professional Forecasters median forecast for Q3 GDP. NBER defined peak-to-trough recession dates shaded gray. Source: Federal Reserve via FRED, Philadelphia Fed, NBER, and author’s calculations.
Oh…never mind.
* Explanation of Emily Litella reference via Wikipedia.