According to foreign media analysis reports, the Federal Reserve officially ended its balance sheet reduction on December 1. As a result, bank reserves have fallen to levels historically associated with funding constraints, and the guaranteed overnight funding rate (SOFR) has periodically tested the upper limit of the policy rate corridor. These developments suggest that the US banking system is gradually entering a liquidity-tight situation.
Against this backdrop, the most important signal from the FOMC may not be a 25 basis point rate cut, but rather the direction of its balance sheet strategy. The Fed is expected to outline, either explicitly or through its implementation notes, how it intends to transition to the Reserve Management Purchase Program (RMP). According to Evercore ISI, the program could begin as early as January 2026, committing about $35 billion a month to purchase treasury securities, bringing annual balance sheet growth above $400 billion. (Golden Ten)
The Federal Reserve's resolution outlook: more important than interest rate cuts is the expansion signal
2025-12-09 08:49:20
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