Fed’s Bostic Flags Liquidity Risk From Heavier Treasury Issuance

Atlanta Federal Reserve President Raphael Bostic said the central bank is closely watching whether rising federal debt and a pick-up in Treasury bond issuance will sap liquidity from financial markets. Speaking on 7 August, Bostic noted that he intends to follow the impact over the “next several months,” particularly as the Fed continues to shrink its balance sheet. He added that monitoring market functioning is critical while the Fed pursues quantitative tightening, indicating policymakers may need to adjust if liquidity conditions deteriorate. Bostic did not signal an immediate policy change but underscored that the interaction between heavier Treasury supply and the Fed’s balance-sheet runoff will be a key factor in forthcoming decisions.