After the Federal Reserve stopped quantitative tightening, signs of banking liquidity stress have already appeared.

[BlockBeats] The recent liquidity issues in the banking system are more severe than many people think. Starting from December 1, the Federal Reserve officially stopped quantitative tightening, but the problem is that bank reserves have dropped to a dangerous level—historically, every time reserves hit this level, there have been incidents in the funding markets.

Looking at the data, the Secured Overnight Financing Rate (SOFR) has already begun periodically hitting the upper bound of the policy rate corridor, which is a clear signal of liquidity stress. Simply put, the US banking system is gradually entering a cash shortage.

So for this FOMC meeting, the market’s real focus isn’t on that 25 basis point rate cut (which is basically a done deal); the real spotlight is on how the Fed will operate its balance sheet going forward. Sources indicate that the Fed is very likely to make a clear statement at the meeting, or reveal through its implementation notes how it plans to launch the Reserve Management Purchase (RMP) program.

According to Evercore ISI’s calculations, this plan could launch as early as January 2026, with the Fed buying $35 billion in Treasuries each month, totaling a balance sheet expansion of over $400 billion a year. If this scale is actually implemented, it would significantly improve overall liquidity in the financial markets.