Core Viewpoint - The Federal Reserve may soon need to purchase bonds to expand its balance sheet after halting the reduction of its bond holdings, as indicated by John Williams, the President of the New York Fed [1][2]. Group 1: Federal Reserve's Actions - The Federal Reserve has officially announced the end of quantitative tightening (QT) on December 1, but liquidity in the U.S. market remains tight, with key interest rates rising significantly [1]. - The secured overnight financing rate (SOFR) recently surged to 4.22%, exceeding the upper limit of the Fed's target policy rate range of 4% [1]. - The use of the Standing Repo Facility (SRF) reached a historical high of $50.35 billion last Friday, indicating increased reliance on emergency tools [2]. Group 2: Liquidity Crisis Factors - The liquidity crisis is primarily linked to the U.S. Treasury, which has been unable to release liquidity due to government shutdown impacts, leading to a Treasury General Account (TGA) balance swelling to approximately $1 trillion [2]. - Bank reserves have decreased to $2.85 trillion, and the balance of overnight reverse repurchase agreements (ON-RRP) is nearly exhausted, significantly weakening the liquidity buffer [2]. Group 3: Future Outlook - Williams emphasized that determining when the Fed will need to inject cash into the system is complex and requires close monitoring of various market indicators [2]. - He clarified that purchasing bonds to maintain adequate liquidity does not equate to a change in monetary policy stance, but rather represents a natural next step in implementing a strategy for sufficient reserves [2].