Bank of America predicts that the Federal Reserve will increase its asset holdings by $45 billion per month, expanding its balance sheet to $6.5 trillion.

While the market is largely focused on the Federal Reserve's December interest rate decision, traders are already watching whether the Fed will expand its $6.5 trillion balance sheet. Michael Kelly, Global Head of Multi-Assets at PineBridge Investments, stated that the market is watching whether the Fed will maintain its balance sheet or begin expanding it. Strategists at Bank of America predict that the Fed will announce this week a monthly expansion of its balance sheet by $45 billion, starting in January 2026. This includes at least $20 billion per month to allow for natural balance sheet growth and $25 billion per month to reverse excessive reserve consumption, an action that will continue at least until the first half of 2026. Roger Hallam, Global Head of Interest Rates at Vanguard Fixed Income, stated that in the long term, the Fed will naturally begin purchasing short-term Treasury bonds next year due to increased economic demand for reserves. Cathie Wood previously mentioned the Fed's easing liquidity conditions and reiterated Ark Invest's long-term forecast of a $1.5 million price for Bitcoin.