Fed Flags Rising Liquidity Risks Despite Stable Rate Outlook
The Federal Reserve's December 2025 meeting minutes reveal growing concerns over liquidity strains in financial markets, even as interest rates remain steady. Policymakers emphasized that cash shortages could emerge independently of rate changes, signaling a shift in focus from traditional monetary policy to underlying market stability.
Reserve levels are nearing the Fed's 'ample' threshold, making them vulnerable to minor fluctuations. In response, the central bank plans to purchase short-term Treasury securities to bolster market functioning. The FOMC's discussions went beyond anticipated rate cuts, highlighting tightening conditions in short-term funding markets that could Ripple through digital asset liquidity.