Complete Guide to the Upcoming Fed Meeting: Rate Cut Expectations and a Potential $45 Billion Bond-Buying Plan

The next Federal Reserve (Fed) Federal Open Market Committee (FOMC) meeting is approaching, with global financial markets watching closely for cues on monetary policy. This meeting has gained even more significance due to mounting expectations of a potential interest rate cut and speculation around a possible $45 billion monthly bond-buying program to address looming liquidity concerns in the U.S. financial system.

When Is The Next Fed Meeting?

The FOMC will convene for its highly anticipated policy meeting on Wednesday, December 10, 2025. Markets and analysts alike will be looking for clear signals from Fed Chair Jerome Powell regarding the policy outlook for the remainder of the year as inflation continues to cool, the labor market presents mixed signals, and financial sector liquidity shifts.

Rate Cut Expectations: Market and Institutional Forecasts

Increasing Probability of a Rate Cut

According to WallstreetCN, recent labor market data and inflation reports have increased speculation that the Fed may cut interest rates sooner rather than later. Market-implied probabilities reflected by CME’s FedWatch Tool suggest a growing belief in a rate cut as early as June 2025, with expectations for up to three reductions by the end of 2025.

Wall Street’s Take

Major Wall Street institutions like Nomura, Morgan Stanley, and Goldman Sachs have updated their forecasts to reflect the possibility of a rate cut in the first half of the year. Goldman Sachs now predicts the first rate cut could happen as early as June, aligning with the broader consensus that the era of aggressive tightening is coming to an end.

Fed Officials’ Cautious Messaging

However, recent comments from Fed Chair Jerome Powell and other FOMC members have maintained a cautious tone. Powell reiterated the Fed’s data-dependent approach, emphasizing that while inflation is receding, the central bank is not yet convinced that price pressures have been fully tamed. Powell stated that it is "not appropriate to ease policy until [the Fed is] confident inflation is sustainably moving toward 2%."

Powell May Announce a $45 Billion Treasury Bill Purchase Plan

Addressing Liquidity Shortages

A critical discussion emerging ahead of this meeting centers on the Fed’s management of financial system liquidity. According to WallstreetCN’s latest analysis, banking sector reserves have been falling closer to a critical threshold where financial market disruptions could occur, much like in September 2019.

To prevent short-term borrowing rates from spiking and ensure smooth policy transmission, the Fed is considering the launch of a $45 billion monthly Treasury bill purchase program. Experts, including Mark Cabana of Bank of America, note that as the Fed’s balance sheet runoff (quantitative tightening, QT) continues, the reserves in the financial system are approaching levels that may necessitate fresh bond buying sooner than previously anticipated.

Background on Quantitative Tightening and Reserve Levels

Since mid-2022, the Fed has been reducing its balance sheet by allowing Treasuries and mortgage-backed securities to mature without reinvestment. The pace of decline in reserves has accelerated, with market participants closely monitoring for signs of funding stress. WallstreetCN cites a Bank of America research note forecasting the Fed could announce its new bond purchase plan as early as March or May 2025, depending on how reserve levels evolve.

Impact on Repo Rates and Market Stability

The move is intended to avoid a repeat of 2019’s liquidity crunch, when a shortage of bank reserves pushed repo rates sharply higher. The proposed bond purchase program would primarily target short-term Treasury bills, aiming to replenish reserves and keep funding markets stable while not interfering with the Fed’s policy rate path.

What to Expect from the March Fed Meeting?

• No Immediate Rate Cut Likely: While markets are hopeful, recent official statements suggest the Fed will maintain current rates until more evidence emerges that inflation remains subdued.

• Focus on Liquidity Operations: Investors will closely watch for any signals or announcements on the launch of a Treasury bill purchase plan or changes to the pace of the Fed’s balance sheet runoff.

• Updated Economic Projections: The March meeting will see the release of the latest Summary of Economic Projections (“dot plot”), offering insight into policymakers’ views on growth, inflation, and the likely trajectory of rate cuts for 2025 and 2026.

How Would a Fed Rate Cut and Bond-Buying Plan Impact Markets?

Equities

A dovish shift by the Fed typically boosts risk appetite, supporting equity markets as lower borrowing costs and increased liquidity make stocks more attractive relative to bonds.

Treasury and Fixed Income

Treasury bill purchases would support prices of short-term government debt, suppressing yields. Broader fixed income markets may rally on prospects of easier monetary conditions.

USD and Crypto

The U.S. dollar could weaken on expectations of lower rates and more liquidity, a trend that often supports risk assets, including cryptocurrencies like Bitcoin. As the Bitget exchange audience knows, Fed pivots have historically spurred crypto rallies, making Fed meetings pivotal events for digital asset prices.

Conclusion: What Investors Should Watch

As the December 2025 Fed meeting approaches, investors should closely monitor official statements, updated projections, and liquidity management decisions. While a rate cut could still be a few months away, Powell and fellow policymakers are signaling readiness to act if inflation trends continue lower or liquidity strains require intervention. The introduction of a $45 billion monthly bond-buying plan would be a major milestone, signaling a shift in balance sheet policy aimed at stabilizing financial conditions as the post-pandemic monetary era evolves.