Fed Injects $40 Billion in December as Global Liquidity Hits Record High
The Fed injected $40.32 billion via repos in December, signaling potential underlying strain despite record global liquidity.Summary
The Federal Reserve injected $16 billion on December 30 through overnight repurchase agreements (repos), bringing the total December liquidity injection to $40.32 billion, the second largest since the COVID-19 crisis. This large operation has sparked debate, suggesting hidden stress in short-term funding markets, although some attribute it to year-end balance sheet constraints.
Concurrently, global liquidity reached a new all-time high, supported by improving collateral conditions and fiscal flows. Analysts suggest this liquidity surge should historically benefit risk assets like Bitcoin, but the cryptocurrency remains range-bound, reflecting a clash between abundant liquidity and the Fed's 'higher for longer' interest rate stance.
Furthermore, FOMC minutes indicated that rate cuts would only occur if inflation continues to decline, while the Fed's reserve management program might involve purchasing up to $220 billion in Treasuries over the next year strictly for rate control, not monetary easing.
(Source：BeInCrypto)