---
title: "\"The Federal Reserve's third-in-command\": The Fed may soon begin to restart bond purchases to manage liquidity"
type: "News"
locale: "zh-CN"
url: "https://longbridge.com/zh-CN/news/265580535.md"
description: "New York Federal Reserve President Williams said that the next step in the Federal Reserve's balance sheet strategy will be to assess when reserves reach adequate levels. At that point, asset purchases will begin gradually to maintain sufficient reserve levels, as other liabilities of the Federal Reserve continue to grow, and the potential demand for reserves will increase accordingly. The impact of the Federal Reserve Governor's stablecoin could reach 30%-60% of savings from 2000 to 2010"
datetime: "2025-11-12T20:20:12.000Z"
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  - [zh-HK](https://longbridge.com/zh-HK/news/265580535.md)
---

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# "The Federal Reserve's third-in-command": The Fed may soon begin to restart bond purchases to manage liquidity

"Federal Reserve's number three," New York Fed President John Williams believes that the Federal Reserve may soon need to restart bond purchases as a technical measure to maintain control over short-term interest rates. Williams emphasized that such purchases do not affect monetary policy.

On Wednesday, December 12, Eastern Time, Williams stated at the New York Fed's 2025 U.S. Treasury Market Conference that the Federal Reserve is looking for a "sufficient" level of bank reserves to ensure firm control over the Fed's interest rate targets and normal conditions in the money market. He said, "Based on recent ongoing pressures in the repo market and other signs that reserves are shifting from abundant to sufficient, I expect that we will soon reach a sufficient level of reserves." At that time, the Federal Reserve will begin to gradually purchase assets to maintain sufficient reserve levels.

Also on Wednesday, Stephen Miran, a Federal Reserve governor appointed by Trump this year, again mentioned the impact of stablecoins. After stating last Friday that the growth of stablecoins could lead to a 0.4 percentage point decrease in the Fed's benchmark interest rate, he said this time that the impact of stablecoins could account for up to 60% of savings during the period from 2000 to 2010.

## Timing of Asset Purchases Approaches

In his keynote speech at the 2025 U.S. Treasury Market Conference, Williams stated:

> "Looking ahead, our next step in the balance sheet strategy will be to assess when reserves reach sufficient levels. At that point, we will begin to gradually purchase assets to maintain sufficient reserve levels, as the Federal Reserve's other liabilities will continue to grow, and the potential demand for reserves will increase accordingly."

Williams pointed out that determining when the system reaches sufficient reserves is an "imprecise science." He stated that he would closely monitor multiple market indicators related to the federal funds market, repo market, and payments to assess the demand for reserves.

Before Williams made these comments, there were fluctuations in the U.S. short-term financing market around the Federal Reserve's monetary policy committee FOMC meeting at the end of October.

Two weeks ago, the Federal Reserve's FOMC meeting decided to cut interest rates by 25 basis points for the second consecutive time to help support a weak job market, even though inflation remains stubbornly above the Fed's 2% target. The Fed also announced plans to end the reduction of its balance sheet (quantitative tightening, QT) in early December, marking the conclusion of the most critical part of this round of monetary tightening.

Last week, Wall Street Journal mentioned that financing pressures in the U.S. money market are raising growing concerns on Wall Street, with several major investment banks warning that ongoing funding pressures could force the Federal Reserve to take more rapid action, potentially even restarting its long-dormant asset purchase program.

## Reduced from $9 Trillion Peak to $6.6 Trillion

Quantitative tightening previously allowed the Federal Reserve to let Treasury and mortgage-backed securities mature without replacement, aiming to eliminate the liquidity increase during the COVID-19 pandemic. This effort has reduced the Federal Reserve's balance sheet from a peak of $9 trillion in 2022 to approximately $6.6 trillion currently Williams hinted that the Federal Reserve needs to start gradually and directly purchasing bonds soon to maintain a balance between market liquidity and economic growth.

On Wednesday, Williams also stated that the Federal Reserve's tool known as the Standing Repo Facility (SRF) is functioning well, providing quick cash to eligible banks. He encouraged banks to use this tool when needed without worrying that borrowing from the Federal Reserve would send a negative signal.

Williams said, "The effectiveness of the SRF relies on market participants utilizing this facility based on market conditions without worrying about stigma or other obstacles. I fully expect the SRF to continue to be actively used in this manner."

The aforementioned Wall Street Journal article mentioned that Wall Street has recently warned that three years of quantitative tightening (QT) and massive Treasury bond issuance have pushed bank reserves close to dangerous levels. Barclays stated that while the decline in the balance of the U.S. Treasury General Account (TGA) and the reduction in Treasury bond issuance could provide short-term relief, liquidity still faces multiple challenges by the end of the year, and the effectiveness of the Federal Reserve's key tool, the SRF, is in question. Dallas Federal Reserve President Lorie Logan made it clear two weeks ago: "If the rise in repo rates proves not to be temporary, the Federal Reserve needs to start purchasing assets."

## Milan Advocates for Rapid Rate Cuts

Federal Reserve Governor Milan stated on Wednesday that independent estimates of the growth of stablecoins indicate that their impact could reach 30%-60% of savings during the period from 2000 to 2010. He also pointed out that the international status of the dollar remains very strong.

Last Friday, Milan told economists in New York that the surge of crypto tokens pegged to the dollar could depress "r-star"—the neutral interest rate that neither stimulates nor hinders economic growth. He cited previous research indicating that the growth of stablecoins could lead to a 0.4 percentage point decrease in the Federal Reserve's benchmark interest rate.

Milan emphasized that stablecoins have been increasing the demand from overseas buyers for U.S. Treasury bonds and other dollar-denominated liquid assets, and this demand will continue to grow. "Stablecoins could become the elephant in the room worth trillions of dollars for central bankers," he said.

Since joining the Federal Reserve Board, Milan has advocated for the Federal Reserve to implement a series of rapid rate cuts of 50 basis points to bring its policy rate closer to his estimate of the neutral rate. He believes that the current neutral rate is far below what most of his colleagues envision, and that the Federal Reserve's current policy stance is well above neutral levels, posing a heavy constraint on the economy

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