Opinion: The Federal Reserve is highly likely to restart balance sheet expansion before the end of the year.

Joseph Wang, a former trader at the Federal Reserve's Open Markets Division in New York and now active on YouTube as "The Fed Guy," believes that after three years of balance sheet reduction, the Fed will likely restart balance sheet expansion before the end of the year. He disagrees with some investors who argue that the Fed's move is to prevent a collapse in risk asset prices, maintain low Treasury yields, or even avert a liquidity crisis. He believes that if the Fed doesn't inject more liquidity into the system by purchasing securities, it will lose control over short-term interest rates, meaning it will no longer be able to set monetary policy. In Wang's view, strong repurchase demand and the ever-expanding TGA account will force the Fed to expand its balance sheet by $300 billion to $500 billion annually. (Jinshi)