Federal Reserve Announces $40B/month Money Printing Policy
In a significant shift in monetary policy, the Federal Reserve has initiated a program of reserve management purchases (RMPs) involving approximately $40 billion per month in Treasury bills, marking the first expansion of its balance sheet since ending quantitative easing in 2022. While Fed officials emphasize that this is not a return to full-scale quantitative easing (QE), critics and some market observers have dubbed it a form of “money printing” due to its effect on injecting new liquidity into the financial system.
The announcement came alongside the Federal Open Market Committee’s (FOMC) December meeting, where policymakers cut the federal funds rate by 25 basis points to a target range of 3.5%-3.75%. The RMPs, starting December 12, aim to maintain ample bank reserves and stabilize short-term money markets, particularly ahead of seasonal liquidity drains like April tax payments.
After concluding quantitative tightening (QT) on December 1—having shrunk the balance sheet by over $2.4 trillion since June 2022—the Fed is now proactively purchasing short-term Treasuries to offset declining reserves, which had fallen to around $2.8 trillion, the lowest in years. Chair Jerome Powell described the moves as technical adjustments to ensure smooth implementation of monetary policy, not stimulus.
However, the $40 billion monthly pace—expected to taper to $20-25 billion after a few months—has sparked debate. Economists note that creating new reserves to buy Treasuries effectively expands the money supply, potentially easing borrowing costs and supporting asset prices amid ongoing fiscal deficits exceeding $1 trillion annually.
Markets reacted positively, with stocks rising on the added liquidity signal. Yet concerns linger about inflation, still hovering near 3%, and whether this blurs the line between monetary policy and fiscal support.
The Fed insists long-term growth in reserves will align with economic needs, but this policy pivot underscores the challenges of normalizing after years of extraordinary measures. As one analyst put it, “It’s not QE by name, but it walks and talks like liquidity easing.” Investors will watch closely for impacts on yields, the dollar, and broader economic growth in 2026.