Bank reserves could fall by $2.5 trillion as the Fed reduces its balance sheet, Fitch Ratings says

• Bank reserves could fall between $900 billion to $2.5 trillion by year's end, Fitch Ratings said.
• That's as the Fed's quantitative tightening dries up liquidity in the banking system.
• "Tighter liquidity could exacerbate the ongoing shift to more restrictive credit conditions, weighing on US growth."

The Federal Reserve's quantitative tightening measures could take trillions of dollars from the banking system and intensify a credit squeeze, Fitch Ratings said Friday. 

"System-wide banking liquidity indicators are still robust, but our baseline projection is for reserves to fall significantly by USD900 billion to USD2.5 trillion by year-end," the ratings agency said.