Analysis: $1 trillion in bank reserves raise concern

Bank reserves exceed the minimum required by the Federal Reserve by $1 trillion, raising questions and concern about inflation and banks' willingness to lend. Banks could activate the funds to support new loans, which could spur demand and inflation. Or the excessive reserves could indicate that bankers remain nervous about making new loans and would rather hang onto the funds. "If they don't make a loan, they can't make a bad one," said Pennsylvania State University associate professor John Mason. Others said the excess is to be expected.

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