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2025-10-31 03:39:24
The Federal Reserve's decision to halt its balance sheet reduction following a decline in bank reserves signals that officials are increasingly relying on the federal funds rate, a key tool for implementing monetary policy and gauging liquidity conditions in the financial system. On Wednesday, the Fed announced it would stop reducing its holdings of Treasury securities starting December 1, after short-term money market rates remained high for several weeks. While the Fed stated it would continue reducing its holdings of mortgage-backed securities (MBS) and reinvesting maturing funds in Treasury bills, it did not announce any other liquidity measures to ease funding cost pressures.
