The Federal Reserve to expand short-term Treasury bond purchases next year, with annual total approaching $220 billion

According to the latest survey data, the scale of the Federal Reserve’s plans to purchase short-term government bonds within the next year has officially surfaced. After the December policy meeting, the institution explicitly announced the initiation of this liquidity injection plan, with an expected total scale of $220 billion.

How the Short-Term Government Bond Purchases Will Unfold

Federal Reserve officials stated during the meeting that the key driver for purchasing short-term government bonds is that the reserves in the financial system have fallen back to a “moderately ample” level. To meet liquidity needs, the central bank plans to implement monthly purchase operations, injecting approximately $40 billion worth of short-term bonds each month.

In terms of specific progress, the Fed has launched the first round of operations in December, followed by two subsequent purchases in January. This phased and evenly distributed approach reflects the Fed’s meticulous management strategy for financial market liquidity.

Why Focus on Short-Term Government Bonds

Short-term government bonds are characterized by high liquidity and low risk, making them the preferred tool for central banks to adjust liquidity. By purchasing these short-term securities, the Federal Reserve can quickly inject liquidity into the financial system while avoiding structural risks associated with long-term asset allocations.

This policy adjustment reflects the Fed’s cautious attitude toward the current financial environment and also hints that market liquidity management will become a key focus in the upcoming work agenda.