In the week ending October 1, the Federal Reserve Balance Sheet (Total Assets) increased by $284.7 billion from the previous week. The yearly rate of growth jumped to 70% from 14.4% in September. Note that since September 15 the pumping by the Fed pushed the fed funds rate to around zero. Bernanke seems to us doesn’t care any longer about the official target of 2%. Pumping by the Fed is not going to work unless the pool of real savings is still ok.
The latest data for the w/e September 22 indicates that commercial bank excess cash reserves stood at $68.8 billion against $2.2 billion in the w/e September 8. We suspect that in w/e Sep 29 excess reserves have increased further, perhaps to $90 billion. Banks it seems prefer to sit on large surpluses of cash rather than lend it out.