Wall Street Braces for Year-End "Cash Crunch," Fed May Hint at "Money Printing" This Week

On December 9, as the end of the year approaches, Wall Street banks are bracing themselves to deal with increasing money market pressures. Analysts say this may prompt the Federal Reserve to consider taking action to rebuild liquidity buffers in this $12.6 trillion market. The Fed’s policymakers will hold a meeting this week, the first since the Fed stopped shrinking its balance sheet (the so-called quantitative tightening), and there are now signs that reserves within the banking system are no longer abundant. The Fed has yet to address policy issues following its balance sheet reduction, including the composition of its Treasury holdings. However, with financing costs remaining high, more market participants believe policymakers should take more concrete steps to ease tensions, such as resuming direct purchases of securities to replenish reserves. They expect Fed Chair Jerome Powell may provide some clues about the next steps when the monetary policy meeting concludes on Thursday, Beijing time. (Jin10)