The latest Fed dot plot looks like a dovish signal, but a closer look reveals the actual situation — only two rate cuts by 2026, another one in 2027, and no change in 2028. The market’s previous expectation of massive stimulus? Gone. Along with that, the so-called Bitcoin super cycle theory mentioned by some is also invalidated.

These days, the Fed’s $40 billion Treasury bond purchases are seen by many as balance sheet expansion. In reality, it's far from that. This is called RMP (Repurchase Market Program) operation, which is not the same as QE (Quantitative Easing). QE actively injects liquidity into the market to stimulate; QT tightens liquidity; while RMP is just a temporary “liquidity supplement”—with only one goal: to maintain bank reserve adequacy and prevent reserve shortfalls, hedging against the end-of-year fiscal TGA funds adjustments and tax collection window, not expanding market liquidity.

The Fed has made it clear: by April 2026, the RMP scale will stay high to cope with the Treasury’s new debt issuance; once seasonal disturbances subside, bond purchases will decline rapidly. The true determinant of market liquidity, however, depends on whether the SLR rule loosens, whether banks are willing to expand their balance sheets, when the Treasury’s TGA account will replenish, and how quickly the Fed’s ON RRP (Overnight Reverse Repurchase Program) reduces.

The next two key data points to watch are: the November non-farm payrolls report on December 16, and the November CPI data on December 18. If CPI does not rebound, the Fed’s future easing policies will be in question; conversely, it points to a continued tight balancing act.

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