Fed Plumbing and the Cut Clock

Fed plumbing is the stronger lens for the timing of the 2024 cuts than the latest payroll print alone. The official case was labor risk. The harder question is whether that labor softening mattered when it did because the reserve buffer had already been drawn down.federalreserve.gov fred.stlouisfed.org fred.stlouisfed.org)

• The overnight reverse repo facility fell from approximately $2,200B in early 2023 to near-zero by late 2024, while WALCL fell from $8.507T in January 2023 to $6.886T in December 2024.fred.stlouisfed.org fred.stlouisfed.org)

• Around the September 18, 2024 cut, payroll growth was 149k over May to August 2024 and unemployment was 4.2% in July-August 2024. In August 2024, the New York Fed also published work on when reserves are ample and when they become less abundant and potentially scarce.fred.stlouisfed.org fred.stlouisfed.org libertystreeteconomics.newyorkfed.org libertystreeteconomics.newyorkfed.org)

Behind the paywall: the exact September 18, 2024 language, the best objection to the plumbing thesis, and the balance-sheet test for the coming week.