The Federal Reserve's move this time is indeed aggressive. At the FOMC meeting in the early hours of December 11 Beijing time, they launched a series of measures: not only did they cut interest rates by 25 basis points as expected, lowering the federal funds rate target range to 3.5%-3.75% (this is the sixth rate cut in this cycle, with a total reduction of 175 basis points), but they also announced a short-term Treasury purchase plan that exceeded market expectations. Once this was announced, global financial markets instantly erupted.

How exactly will they operate? Starting December 12, the Federal Reserve will initiate the so-called "Reserve Management Purchase (RMP)" operation. In December, they will inject $40 billion to buy short-term Treasury bills, followed by a fixed $45 billion each month. This pace will be maintained for at least six months, with a total scale reaching $270 billion. But that’s not enough; in December, through reinvestment of maturing agency debt, an additional approximately $14.4 billion in Treasury bills will be purchased. The dual approach has a clear purpose: to rebuild the reserve levels in the banking system and ease short-term interest rate pressures.

It’s important to emphasize— the Fed repeatedly states that this is not quantitative easing (QE). The real goal is to keep reserves at a "ample level," hedging against the liquidity gap caused by the previous QT balance sheet reduction of $2.4 trillion, and preventing short-term rates like SOFR from exceeding the policy corridor upper limit. Powell used an analogy at the press conference, saying it’s like "giving the financial system an early vaccine," to prevent a repeat of the liquidity crunch in 2019, rather than unlimited easing after a crisis. This analogy is quite fitting.

Market reactions were incredibly swift. Trading volume in short-term interest rate futures surged, the two-year swap spread widened to its highest point since April, and short-term financing pressures visibly eased. U.S. stocks rebounded collectively, with short-term Treasury yields leading the rally. The yield on the 2-year Treasury dropped 7.5 basis points that day, to 3.54%. Expectations of liquidity easing immediately transmitted into asset prices across the board.

Major Wall Street investment banks are now revising their forecasts. Barclays predicts that by 2026, the Fed’s bond purchases could reach nearly $525 billion; JPMorgan estimates about $490 billion; and Wells Fargo says around $425 billion. Although the figures vary, the direction is consistent—the Fed is set to become the "number one buyer" of U.S. Treasuries. What does this mean? The net supply of Treasury bills available to private investors in 2026 will be significantly reduced. The expectation of liquidity easing is reshaping the entire financial market allocation logic.