The Federal Reserve pauses RMP bond purchases for the second consecutive month, with bank reserves remaining in an ample range.

The Federal Reserve has once again paused its Reserve Management Purchases (RMP), reflecting the current ample level of bank reserves and the overall stable operation of the money market.

The Federal Reserve announced on Monday that during the next monthly period ending October 14, the New York Fed’s Open Market Operations Desk will not conduct any Treasury purchases for reserve management purposes, marking the second consecutive month that the RMP suspension has been maintained.

Meanwhile, the desk will still carry out approximately $1.56 billion in reinvestment purchases during this period.

This suspension indicates the Federal Reserve’s confidence in the smooth functioning of the short-term funding markets. The Secured Overnight Financing Rate (SOFR) has mostly remained below the Interest on Reserve Balances (IORB), reinforcing this judgment.

As of September 9, U.S. bank reserve balances stood at $3.04 trillion, up from $2.85 trillion at the end of last year, and above the year-to-date average of $3.01 trillion. This adjustment does not signal any shift in monetary policy or balance sheet strategy.

There is a clear split among major Wall Street institutions regarding the path ahead.

Strategists at Wells Fargo and Bank of America had both anticipated this month’s RMP pause, and expect that as the U.S. Treasury sharply increases bond issuance in mid-October, localized pressures in funding markets may reemerge, at which point purchases could resume.

Barclays strategist Samuel Earl forecasts that purchase volumes will rebound to $1 billion in October and further to $2 billion in November.

Citigroup strategists, however, believe the Federal Reserve may keep the pause in place through year-end. Citi points out that bank reserve balances have been pushed back into the "slightly ample" range, and the next wave of Treasury supply is unlikely to put significant pressure on the repo market.

At the end of 2025, the Federal Reserve abruptly halted its balance sheet reduction process and instead injected liquidity into the financial system by purchasing short-term Treasuries.

In December last year, the Fed began purchasing about $4 billion in Treasuries with less than one year remaining maturity each month. Then-Chair Powell described this as a "front-loaded" move aimed at ensuring ample reserves before the April tax season.

Subsequently, purchase volumes were rapidly compressed through several rounds: cut to $2.5 billion in April, further down to $1 billion in May—both exceeding market expectations—and fully paused in August.

On the policy communication front, the Federal Open Market Committee revised its policy implementation statement in June to clarify that RMP could be temporarily paused when money market conditions allow, demonstrating operational flexibility.

In July, New York Fed's Roberto Perli reiterated that Reserve Management Purchases are not on a preset path. The desk may adjust the monthly purchase amount up or down at any time based on money market conditions, with the goal of keeping reserves in the ample range.

Over the past month, short-term funding markets have generally exhibited a loose stance, with cash supply far surpassing the available collateral.

Banks continue to park more funds in short-term markets, while money market fund assets have climbed to record highs. Even as the Treasury keeps up sizable short-term issuance, these factors have effectively capped upward pressure on money market rates, creating a favorable market environment for the Fed to maintain a purchase pause.

In addition, the Treasury cut supply ahead of the quarterly tax deadline, which further alleviated market funding pressure in the short term. The next key milestone will be when the Treasury restarts large-scale bond issuance—and whether the market can continue to absorb it smoothly at that time.