๐ FED STOPS THE CLOCK: Quantitative Tightening Comes to an End After 3 Years
The Federal Reserve has officially wrapped up its Quantitative Tightening (QT) cycle as of December 1st, closing out a three-year run that drained more than $2.2 trillion from its massive balance sheet โ falling from a $9T peak down to about $6.5T.
๐ Policy Flip: From Contraction to Stabilization
The Fed is shifting gears โ no longer pulling liquidity out of the system, but moving into a maintenance mode, keeping the balance sheet steady rather than shrinking it.
Hereโs the new playbook:
๐น Run-Off Ends:
The monthly $60B Treasuries + $35B MBS roll-off limits are now fully discontinued.
๐น Full Treasury Reinvestment:
All maturing Treasuries will now be reinvested back into the market.
๐น MBS Rotation โ T-Bills:
Money from maturing MBS will flow into short-term Treasury Bills โ gradually reducing MBS exposure while keeping bank reserves comfortably high.
๐ Market Vibes & Liquidity Impact
This shift removes a major drain on market liquidity and provides a calmer monetary backdrop.
Fed officials emphasize:
โจ This is normalization, NOT a return to QE.
โจ The goal is healthy reserve levels, not market pumping.
โจ Inflation cooling + stable labor market made this move possible.
๐ Bottom Line (New Pronunciation Style)
The Fed just removed one of the biggest structural pressures on the markets.
QT is over.
Stability mode is ON.
A new phase begins โ one with smoother liquidity and fewer headwinds for risk assets.
Is the timing right for the Fed to pause the balance sheet shrinkage?
๐ Drop your thoughts below!
