macro

The Fed's Quiet Liquidity U-Turn

By Marcus WebbPublished August 27, 20265 min read
Fed Balance Sheet has flattened near $6.75T since mid-July while M2 money supply re-accelerated to 5.41% YoY growth in July 2026. Source: Federal Reserve Economic Data (FRED): WALCL and M2SL series

The Fed's Quiet Liquidity U-Turn Quantitative tightening was supposed to be systematically draining liquidity from the financial system. The Fed's balance sheet tells a different story. Total assets have been essentially flat near $6.75 trillion since mid-July, essentially unchanged from late July at $6.738 trillion.

Key Takeaways Fed balance sheet has been flat near $6.75T since mid-July, with QT having quietly paused M2 money supply re-accelerated to 5.41% YoY in July, up 0.44% MoM Three hawkish FOMC dissents on July hold versus balance-sheet reality Jackson Hole 2026 will clarify if this is a tactical pause or new direction QT has quietly paused rather than accelerating. This is happening…

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