Post #2969

The FOMC did exactly what the market expected, a 25 bps cut. But the real headline is something bigger: the Fed will buy $40B in Treasury bills over the next 30 days, starting December 12. These are “reserve management purchases,” meant to keep liquidity stable and bank reserves in the “ample” zone. Some people are calling this QE because the balance sheet will expand but this is not real QE. True QE is when the Fed pumps hundreds of billions every month. The bigger picture is the U.S. has to refinance nearly $9T in 2026. A rollover of that size can only be managed through some combo of rate cuts, QE, or money printing. During COVID, rates were near 0%. Today they’re still above 3.5%. If the Fed doesn’t bring rates lower and later start QE, U.S. interest costs could cross $1 trillion per year by FY2026, bigger than the entire defense budget. That’s why, in my opinion, QE will definitely start sometime between Q1–Q2 2026, and before that window, we’ll likely see more rate cuts before real QE kicks in.