Fed and ECB may retract significant funds from banks
Central banks’ injected funds may become redundant due to high inflation and interest rates
The Federal Reserve and European Central Bank may retrieve up to 90% of the money they provided to banks over the past decade, according to a Fed paper set to be presented at the ECB’s annual meeting in Portugal. High inflation and interest rates have made the funds less necessary for banks, with the Fed potentially looking to reduce total reserves from their current $6 trillion to somewhere between $600 billion and $3.3 trillion. The ECB could also reduce its liquidity provision from €4.1 trillion ($4.51 trillion) to as little as €521 billion.