Bank Reserves Parked at Fed Rebound, Rise Back Above $3 Trillion

The US banking system’s reserves, a key factor in the Federal Reserve’s decision to keep shrinking its balance sheet, rose back above $3 trillion, rebounding from the lowest level in more than four years.

Bank reserves climbed by about $440 billion in the week through Jan. 8 to $3.33 trillion, according to Fed data released on Thursday. Just last week, balances dropped by about $326 billion, which was the largest weekly slide in over two-and-a-half years.

The reversal comes after typical year-end dynamics that forced banks to pare balance-sheet intensive activities like repurchase agreement transactions — to shore up ...