On December 1, 2025, the Federal Reserve officially concluded the cycle of quantitative tightening (QT), which lasted for more than two and a half years. During this period, the Fed withdrew over $2 trillion from the financial system, reducing its balance from $9 trillion to $6.6 trillion. This is the largest and longest phase of liquidity withdrawal in the history of modern markets.
1. Why is this decision crucial?
The Fed stopped QT not due to a crisis in the banking system or a recession, but because it reached a level of reserves that the committee deemed sufficient for the stable functioning of the money market. This means: the regulator aims to avoid a repetition of situations similar to the repo market stress in 2019.
Indicators that preceded the decision: • Probability of a rate cut in December is 86.4%.
• The consumer sentiment index is 51, one of the lowest values.
• The manufacturing sector has been declining for eight months in a row.
• ADP data indicates negative employment dynamics.
These signals have created the grounds for a transition from a tight policy to a neutral one.
2. How is the monetary regime changing?
The end of QT does not equal the beginning of QE. This is a return to a balanced regime where the Fed's balance sheet no longer decreases but also does not expand. However, the mere fact of a change in the liquidity vector is significant.
Main consequences: • Pressure on the government bond market is easing.
• Global liquidity ceases to decrease for the first time since 2022.
• Risk assets are experiencing the disappearance of a key negative factor — the balance sheet reduction.
Markets are already reacting: investors are returning to assessing the prospects of economic growth instead of tracking the Fed's balance.
3. Does this mean a transition to a bullish trend?
Asset growth will only be possible if the market believes in economic recovery. If the macro data from the U.S. continues to weaken, the end of QT may not yield the expected effect. It all depends on whether the economy can maintain momentum amid slowing production and worsening sentiment.
4. The nearest key events
• Jerome Powell's speech on December 2 defines the rhetoric for the final stage of the year.
• A rate cut to the range of 3.50–3.75% is expected on December 9.
This is a transitional moment that shapes a new monetary regime for 2026. The era of tight liquidity contraction has ended; ahead is a market with new rules and a changed structure of capital flows.
Conclusion
QT 2022–2025 is officially completed. The monetary cycle has entered a new phase. Markets are losing the main restraining factor, but further dynamics will depend not only on the Fed but also on the actual state of the U.S. economy. Old behavioral models no longer work — ahead is a new period of adaptation and risk reassessment.