The Federal Reserve may soon need to expand its balance sheet through strategic bond purchases and possibly shorten the average duration of its debt holdings, according to remarks by John Williams, President of the Federal Reserve Bank of New York. The move aims to ensure adequate liquidity by achieving a balance of reserves categorized as 'ample' rather than simply 'somewhat above ample.'

Williams, speaking at the European Central Bank Conference on Money Markets 2025, indicated that the Fed anticipates nearing the desired reserve levels sooner rather than later. Consequently, gradual asset purchases could commence in response to sustained repo market pressures and other indicators signaling a shift in reserve status.

Shortening the average duration of its government debt holdings forms

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