Federal Reserve's Potential Balance Sheet Expansion Draws Market Attention

According to Odaily, as the market closely watches the Federal Reserve's December interest rate decision, traders are beginning to focus on whether the Fed will expand its $6.5 trillion balance sheet. Michael Kelly, Global Head of Multi-Asset at PineBridge Investments, noted that the market is observing whether the Fed will maintain its balance sheet or start expanding it. Strategists at Bank of America predict that the Federal Reserve will announce this week an expansion of its balance sheet by $45 billion per month starting January 2026. This includes purchasing at least $20 billion monthly to achieve natural balance sheet growth and $25 billion monthly to reverse excessive reserve depletion, with the action expected to continue until at least the first half of 2026. Roger Hallam, Global Head of Rates at Vanguard's Fixed Income Group, stated that in the long term, due to the economy's expanding demand for reserves, the Fed will naturally begin purchasing short-term Treasury securities next year. Previously, Cathie Wood mentioned the easing of the Fed's liquidity conditions and reiterated Ark Invest's long-term prediction of Bitcoin reaching a price of $1.5 million.