Federal Reserve Likely to Expand Balance Sheet by Year-End, Analyst Predicts

According to Odaily, Joseph Wang, a former trader in the New York Federal Reserve's open market department and now known as The Fed Guy on YouTube, anticipates that the Federal Reserve will likely resume expanding its balance sheet by the end of the year after three years of reduction. Wang disagrees with some investors who believe the Federal Reserve's actions aim to prevent a collapse in risk asset prices, maintain low Treasury yields, or avoid a liquidity crisis. He argues that without injecting more liquidity into the system through securities purchases, the Federal Reserve risks losing control over short-term interest rates, which would hinder its ability to set monetary policy. Wang suggests that strong demand for repurchase agreements and the expanding Treasury General Account (TGA) will compel the Federal Reserve to increase its balance sheet by $300 billion to $500 billion annually.