Core Viewpoint - The Federal Reserve's liquidity facilities are expected to experience significant activity as the month closes, impacting the central bank's balance sheet reduction process [1][2]. Group 1: Liquidity Facilities - The Fed's reserve repo facility and the Standing Repo Facility (SRF) are anticipated to see major inflows due to month- and quarter-end volatility, amidst ongoing balance sheet reductions that are limiting liquidity [2][3]. - Analysts from Wrightson ICAP project that the reverse repo facility could increase from negligible usage to as high as $275 billion by the end of the month [3]. - The SRF is expected to see inflows of around $50 billion by September 30, significantly higher than the $11 billion recorded on June 30 [4]. Group 2: Market Dynamics - Accurately assessing market liquidity at quarter-end is challenging due to transient factors affecting money flow, which are often reversed at the start of a new quarter [5]. - The performance of the Fed's tools is crucial for maintaining control over short-term interest rate targets, which is influenced by the management of its cash and asset holdings [6]. Group 3: Interest Rate Expectations - The Fed is anticipated to raise its benchmark interest rate by 25 basis points following its upcoming policy meeting, with a policy statement and economic projections to be released [7]. - Since 2022, the Fed has been reducing its balance sheet, which had expanded to approximately $9 trillion during the pandemic, as part of efforts to normalize market liquidity [8].