The Fed's key focus this week: Not interest rate cuts, but whether it will inject new liquidity into the market

**December 8** Even as markets appeared to price in another Fed rate cut last Friday—pushing U.S. stocks near record highs—the real driver of the stock market and other risk assets’ rally this week (post-Fed policy meeting) may not be interest rates after all. After quietly pausing its balance sheet runoff, the key could lie in how the Fed manages its massive balance sheet and whether it will inject fresh liquidity into markets. Bank of America’s global rates strategy team said Friday it expects the Fed to announce this week that it will begin purchasing Treasury bills (maturities ≤1 year) at a $45 billion monthly pace starting in January, as part of “reserve management operations.” Some argue this timeline could stretch longer, and the Fed may not need aggressive steps to keep markets functioning smoothly. Roger Hallam, global head of rates at Vanguard Asset Management, forecasts the Fed will start buying T-bills at a $15 billion–$20 billion monthly clip by the end of Q1 or early Q2 next year. Kelley of PineBridge expects the Fed to cut rates by another 25 basis points on December 10, pushing the policy rate into a 3.5%–3.75% range—closer to the historical neutral rate of roughly 3% targeted to sustain economic stability. (Source: FX Street)