1. The Federal Reserve Is Re‑Expanding Liquidity Since early December, the Federal Reserve has expanded its balance sheet by roughly $105 billion, marking the fastest increase since the regional banking turmoil of 2023. This move aims to ease pressure on bank reserves, which had been tightening significantly. St. Louis Federal Reserve Key points The Fed’s balance sheet had fallen by about 30% since 2022, draining liquidity from the system. Facing renewed stress, the Fed resumed injections to stabilize reserves. It is now purchasing around $40 billion in U.S. Treasuries per month, supporting financial markets. Historically, such liquidity waves tend to boost risk appetite and lift asset prices. Bottom line: the Fed has shifted from tightening to quietly re‑adding liquidity. 2. Private‑Secto
Fed Under Pressure: CPI Shock Or Rate-Cut Reset for Market?
Jerome Powell confirmed that U.S. Department of Justice has issued a grand jury subpoena to the Federal Reserve, escalating political pressure and reviving concerns over Fed independence. Markets worry this could complicate the rate-cut outlook. This week’s December CPI may determine whether November’s soft reading was a one-off or the start of a real downtrend. CPI Estimates: 2.7%. If CPI prints closer to swaps pricing, does the market need to reprice rate-cut expectations?
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