Fed Balance Sheet Contraction Continues
As the chart illustrates, it is still at a very elevated level (It is still upp more than 100% compared to 52 weeks earlier), but if the trend continues it could stop the recent high level of money supply growth. M2 continued to rise during the week, while MZM fell back during the week because of a big drop in Institutional Money Funds.
UPDATE: David Altig discusses this contraction here. He points out that much of the decline has come in the commercial paper funding facility and that demand for that has gone down as risk aversion and so also commercial paper yields have gone down. And that similarly currency swaps for foreign central banks have decreased because the factor that made central banks demand it, the high LIBOR rates, has similarly abated.
He is probably right about this, but even excluding these assets, Reserve Bank Credit has contracted.