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

Joseph Wang, who previously served as a trader in the Open Market Department of the New York Federal Reserve and is now active on his YouTube channel under the name The Fed Guy, believes that after three years of balance sheet reduction, the Federal Reserve is very likely to restart balance sheet expansion before the end of the year.

He does not agree with the view of some investors—that the Federal Reserve's actions are aimed at preventing a collapse in risk asset prices, maintaining low Treasury yields, or even avoiding a liquidity crisis. He believes that if the Federal Reserve 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 formulate monetary policy.

In Joseph Wang's view, strong demand for repurchase agreements and the continuously expanding TGA account will force the Federal Reserve to expand its balance sheet by $300 billion to $500 billion each year. (Jin Shi)