Fed's Reserve Signal: We're Close to 'Adequate' Levels

New York Fed President John Williams just dropped a key message at Frankfurt: reserve levels are shifting from ‘abundant’ to ‘adequate’, and we’re getting close.

What does this mean? The overnight repo market is showing stress, and it’s basically a flashing yellow light that the Fed’s excess liquidity buffer is shrinking. Williams is signaling the Fed isn’t in a rush to slash rates further—they’re managing the soft landing carefully.

Key takeaway:

• The standing repo facility (SRF) will stay in active use to keep short-term rates stable
• “Adequate” doesn’t mean “loose”—it’s just enough, nothing extra
• Upward pressure on money market rates is real, and the Fed sees it coming

For traders: This is hawkish-lite. It suggests the Fed sees reserves as normalized (not tight), which could justify holding rates steady longer than some expected. Watch repo spreads closely—when they spike, it triggers the SRF.

Bottom line: The era of abundant reserves is ending. The Fed’s toolbox just became a key part of the playbook.