The current Federal Reserve has reached a stage where it must prepare a narrative for the next round of liquidity.

Unlike the direct economic stimulus of QE, the Federal Reserve will package its easing actions more discreetly.

In this FOMC meeting, we are likely to see some clues.

In fact, the Federal Reserve has already laid some groundwork to address liquidity issues.

The FOMC will stop its previous balance sheet reduction approach of not reinvesting maturing assets starting from December 1, meaning that it will return principal from agency debt/agency MBS into Treasury bills, while also extending the maturity of government bonds.

Next, the New York Fed trading desk clarified that starting in December, it will purchase Treasury bills in the secondary market to undertake these reinvestments and will announce operational arrangements monthly.

At the same time, it was mentioned in the last FOMC that increasing the proportion of Treasury bills would allow the Federal Reserve greater policy and reserve management flexibility without needing to significantly raise the total amount of reserves.

Therefore, in the coming months, something that is likely not QE but is indistinguishable from QE may emerge, with the most intense market discussions currently focused on RMP, or reserve management purchases.

So what is RMP?

The official explanation from the Federal Reserve is that as the economy grows, the demand for money will naturally increase. To ensure that there is enough money (reserves) in the banking system to handle daily payments and settlements, the Federal Reserve needs to passively buy some bonds to inject a little money into the market, maintaining sufficient liquidity.

Its purpose is very straightforward: to maintain the operation of the banking system and prevent a shortage of money from causing interest rates to spike. The operation is also very simple, only buying short-term Treasury bills.

Why is it said to be essentially similar to QE?

Although the Federal Reserve tries to distance itself from it, to the market and funding perspective, the operational principles of RMP and QE are identical.

QE is when the Federal Reserve creates dollars out of thin air and buys bonds, providing cash to the market. RMP also creates dollars out of thin air and buys bonds to let the market access cash. The result is the same: the Federal Reserve's balance sheet expands, and liquidity in the market increases.

For cryptocurrencies, U.S. stocks, and other risk assets, as long as the Federal Reserve is buying something, it is injecting liquidity. Whether it is to rescue the economy or maintain the operation of banks, as long as it is an injection of money, it will ultimately spill over into asset prices. $BTC #美联储何时降息？