Last week, the Federal Reserve took measures to soothe the market, but signals this week indicate that the problems are not fully resolved. The most sensitive nerve of the financial system—the short-term funding market—has started flashing red again.

On Monday, the overnight general collateral repurchase agreement rate once again broke through the Federal Reserve's target range for the federal funds rate (3.5%-3.75%), soaring to around 3.8%. This rate may seem abstract, but it is actually very important—it reflects the cost of the shortest-term borrowing between large financial institutions and is considered a barometer of financial system liquidity. The higher the number, the tighter the market.

Just a week ago, the Fed announced a plan to purchase $40 billion of short-term government bonds each month, hoping this move could ease funding market pressures. But what was the market’s reaction? It was somewhat lukewarm. Some observers pointed out that interest rates remain under pressure, which precisely indicates that the liquidity injection by the Fed may not be as effective as expected. This plan will continue until January 14 of next year.

How important is the short-term funding market to the financial system? Imagine it as the "blood supply" of the entire system. Once blocked, funds become scarce, and the market can easily fall into chaos—investors experienced this at the end of 2019. Now everyone is asking: Can the Fed’s current measures stabilize the situation? During the peak cash demand at year-end, will major financial institutions be able to access low-cost funds with confidence?

Wall Street is also intensely discussing this. A strategist at Morgan Stanley directly posed a key question: Are the Fed’s current actions truly enough? Or do more operations need to be taken to prevent the problem from worsening? This question hangs over all market participants.