Core Viewpoint - The Federal Reserve has not yet decided on the next steps for interest rate cuts, but the market is already signaling liquidity concerns, as evidenced by the sudden large-scale use of the Standing Repo Facility (SRF) [1][4]. Group 1: Federal Reserve Actions - The SRF was unexpectedly utilized for $6.75 billion, marking the highest single-day operation since the second quarter of this year and the largest outside of quarter-end since the pandemic began [1][4]. - The total amount of bank reserves in the Federal Reserve system has fallen below $3 trillion, a threshold seen as critical between "ample reserves" and "tight reserves" [2][6]. - Federal Reserve Chairman Jerome Powell indicated that the balance sheet reduction may reach a "stopping point" sooner than expected, with major banks adjusting their forecasts for the end of this process [9][10]. Group 2: Market Indicators - The difference between the Secured Overnight Financing Rate (SOFR) and the effective federal funds rate has slightly widened, serving as an early warning signal of liquidity pressure [4][11]. - The usage of the SRF indicates a shift in market liquidity conditions, as it is typically underutilized except during quarter-end adjustments [6][11]. - The Reverse Repo Program (RRP) has seen its usage drop to a four-year low of $3.5 billion, indicating a depletion of the "passive pool" for U.S. Treasury financing [7][8]. Group 3: Future Outlook - Observers are closely monitoring the SOFR's trajectory, as a continued widening of the interest rate spread could lead to a self-reinforcing cycle of liquidity shortages [17]. - The market's response to the SRF's usage and the SOFR indicators in the coming days will be crucial in determining whether the liquidity situation stabilizes or worsens [15][17].