As I have discussed previously, bank holdings of reserves to meet LCR requirements could shift toward Treasury securities, as aggregate reserves decline, without much upward pressure on the federal funds rate.5 That said, even if uncertain, it is probably safe to say that reserve demand is much higher than before the crisis.
As we work to calibrate ample reserves, there are some tradeoffs that are worth noting. For example, we could operate with a level of reserve balances at the lower end of what might be considered ample.