Viewpoint: The Fed is highly likely to restart balance sheet expansion before the end of the year.

On November 6, Joseph Wang, who previously served as a trader in the New York Fed's Open Market Division and is now active on his YouTube channel as The Fed Guy, believes that after three years of balance sheet reduction, the Fed is likely to restart balance sheet expansion before the end of the year. He does not agree with some investors' view that the Fed's move is to prevent a collapse in risk asset prices, maintain low Treasury yields, or even avoid a liquidity crisis. He believes that if the Fed does not 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 Joseph Wang's view, strong repo demand and the expanding TGA account will force the Fed to expand its balance sheet by $300 billion to $500 billion each year. (Jin10)