The timing of stopping balance sheet shrinkage signals that the federal funds rate remains the Federal Reserve's preferred tool
2025-10-30 22:09:45
The Federal Reserve's decision to halt its balance sheet cuts after falling bank reserves suggests officials are relying more on the federal funds rate, the main tool for monetary policy and a measure of liquidity in the financial system. The Fed said on Wednesday it would stop reducing its Treasury holdings from December 1 after weeks of high short-term money market rates. While it said it would continue to reduce its holdings of mortgage-backed securities and reinvest maturing funds in treasury securities, it did not announce other liquidity measures to ease pressure on funding costs.
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