Core Viewpoint - The Federal Reserve is approaching a new phase of "liquidity replenishment" after two years of balance sheet reduction, with potential plans to expand its securities holdings soon [3][4]. Group 1: Federal Reserve's Strategy - The Federal Reserve plans to assess whether the reserve levels have transitioned from "slightly above adequate" to "adequate" before gradually resuming net asset purchases [4]. - Any future bond purchases will be part of a pre-planned liquidity management action under the "adequate reserves framework," not a new stimulus policy [4][6]. Group 2: Market Conditions - Recent fluctuations in the repo market indicate a transition of liquidity from "ample" to "adequate," with some repo rates exceeding the Fed's target range [5]. - The usage of the Standing Repo Facility (SRF) has surged, reaching the highest frequency since its establishment in 2021, with borrowing exceeding $10 billion on two occasions last week [5]. Group 3: Future Expectations - Market analysts anticipate that the Federal Reserve may officially initiate "reserve management" bond purchases in the first quarter of 2026 to maintain liquidity in the banking system [7]. - The Federal Reserve is closely monitoring indicators such as the federal funds market and repo market to evaluate changes in reserve demand [7].

Core Viewpoint - The Federal Reserve is approaching a new phase of "liquidity replenishment" after two years of balance sheet reduction, with potential plans to expand its securities holdings soon [1][2]. Group 1: Federal Reserve's Strategy - The Federal Reserve may initiate "reserve management" bond purchases to maintain bank reserves at "adequate levels," which does not indicate a fundamental change in monetary policy stance [2]. - The next step in the Fed's balance sheet strategy involves assessing whether reserve levels have transitioned from "slightly above adequate" to "adequate" [2]. - The bond purchases are part of a planned liquidity management action under the Fed's "adequate reserves framework," not a new stimulus policy [2]. Group 2: Market Conditions - Recent fluctuations in the repo market indicate a transition of liquidity from "ample" to "adequate," with some repo rates exceeding the Fed's target range [3]. - The usage of the Standing Repo Facility (SRF) has significantly increased, reaching the highest frequency since its establishment in 2021, with borrowing exceeding $10 billion on two occasions last week [3]. - The effective federal funds rate (EFFR) is approaching the upper limit of the Fed's target range, signaling tightening market liquidity [3]. Group 3: Future Expectations - Market data suggests that financial institutions have been increasingly utilizing repo facilities since October, with some analysts predicting that the Fed may officially start "reserve management" bond purchases in the first quarter of 2026 [4]. - The Fed is closely monitoring indicators such as the federal funds market, repo market, and payment systems to assess changes in reserve demand [4]. - The implementation of reserve management bond purchases is viewed as a natural step in executing the adequate reserves strategy, aimed at maintaining smooth market operations rather than stimulating economic growth [4].

Core Viewpoint - The Federal Reserve is approaching a new phase of "liquidity replenishment" after two years of balance sheet reduction, rather than a return to quantitative easing [1][2]. Group 1: Federal Reserve's Strategy - The Federal Reserve may soon consider expanding its securities holdings to maintain bank reserves at "adequate levels," which does not indicate a change in the fundamental stance of monetary policy [2][5]. - The next step in the Fed's balance sheet strategy involves assessing whether reserve levels have transitioned from "slightly above adequate" to "adequate" [2]. Group 2: Market Conditions - Recent fluctuations in the repo market indicate a transition of liquidity from "ample" to "adequate," with some repo rates exceeding the Fed's target range, reflecting increased demand for short-term funds [4]. - The usage of the Standing Repo Facility (SRF) has surged, reaching the highest frequency since its establishment in 2021, with borrowing exceeding $10 billion on multiple occasions [4]. Group 3: Future Expectations - Market analysts anticipate that the Fed may initiate "reserve management" bond purchases in the first quarter of 2026 to maintain liquidity in the banking system [5]. - The Fed is closely monitoring indicators such as the federal funds market, repo market, and payment systems to evaluate changes in reserve demand [5].