Federal Reserve Ends Quantitative Tightening on December 1: Powell's Remarks to Address Policy Outlook

The U.S. Federal Reserve will conclude its multi-year quantitative tightening (QT) program, marking the end of efforts to reduce its pandemic-era balance sheet from $9 trillion to $7.4 trillion. This normalization step, announced in the November FOMC statement, aims to ease liquidity conditions as inflation moderates toward the 2% target. Fed Chair Jerome Powell is scheduled to speak at 4 p.m. ET on the same day, providing insights into economic conditions, the monetary policy framework, and the outlook ahead of the December 9–10 FOMC meeting.

(Sources: Polymarket)

QT Conclusion: A Shift Toward Neutral Policy

Quantitative tightening, initiated in June 2022, involved allowing up to $95 billion in Treasury and mortgage-backed securities to roll off the Fed’s balance sheet monthly. The program slowed Treasury runoff to $25 billion per month in June 2024 before halting entirely on December 1. This reversal reflects the Fed’s assessment that the balance sheet has reached an appropriate size, freeing up liquidity without risking financial instability.

The move aligns with Powell’s recent emphasis on data-dependence, noting in a November 14 speech that “the economy is in a good place” but risks remain balanced between employment and inflation. Markets now price a 25 basis point cut to 3.50%–3.75% at the December meeting, with 82.7% probability per CME FedWatch.

Powell’s Speech: Key Topics and Expectations

Powell’s 4 p.m. ET remarks, delivered at the New York Economic Club, will cover:

• Current economic indicators, including the latest jobs reports showing 119,000 September payrolls and 4.4% unemployment.
• The Fed’s policy framework and communication strategy.
• Outlook for monetary policy amid cooling inflation (2.7% core PCE) and labor market softening.

Investors anticipate Powell to reaffirm the Fed’s commitment to 2% inflation while signaling flexibility on future cuts. Recent dovish comments from Governors Waller and Daly have boosted easing odds, but Powell has stressed the need for more data to confirm trends.

Crypto Market Implications: Liquidity Boost for Bitcoin

Crypto observers view the QT end as a liquidity tailwind, potentially injecting $25 billion monthly into markets. Bitcoin, trading near $90,355 (+3.83% daily), has shown sensitivity to Fed signals, with the halt echoing 2020’s QE resumption that fueled a 1,000% rally. Ethereum at $3,019 (+3.21%) and Solana at $142.53 (+4.25%) also benefited, lifting the total market cap to $3.2 trillion.

Analysts like those at Wintermute note: “The QT pause removes a major liquidity drag, supporting risk assets if December cuts follow.” However, Powell’s data-dependent stance tempers expectations for immediate aggressive easing.

In summary, the Fed’s December 1 QT conclusion and Powell’s 4 p.m. ET remarks signal policy normalization amid balanced risks, with 82.7% odds of a 25bps December cut boosting liquidity sentiment and crypto gains like Bitcoin’s 3.83% to $90,355.