Key Policy Shift
The U.S. Federal Reserve has announced the end of Quantitative Tightening (QT) on December 1, 2025, marking a significant shift in its monetary policy. This decision is aimed at economic stabilization and reflects a change in the committee's outlook.
Rationale and Leadership
Jerome Powell, Chair of the Federal Reserve, and the Federal Open Market Committee (FOMC) are the key players behind this policy change. The committee cited increased risks to employment as a significant factor in their decision-making process.
"The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months." — Jerome Powell, Chair, Federal Reserve
Market Impact and Liquidity
The decision to end QT is expected to influence global financial markets, potentially boosting assets like Bitcoin (BTC) and Ethereum (ETH). Liquidity is projected to increase due to the halt in the runoff of the Federal Reserve's balance sheet.
Interest rates have been reduced, a move that could further boost market liquidity and investor sentiment. U.S. financial markets may experience shifts as the Federal Reserve resumes reinvestment operations.
Major cryptocurrencies may respond favorably to this policy shift as risk appetite potentially returns. Market participants are advised to monitor activities closely, as historical trends suggest a positive impact on asset prices during past balance sheet expansions. The Federal Reserve's strategy could enhance liquidity, shifting market dynamics and affecting various sectors.