Former Fed Trader Joseph Wang Predicts Balance Sheet Expansion by Year-End to Maintain Rate Control

Key TakeawaysFormer New York Fed trader Joseph Wang expects the Federal Reserve to restart balance sheet expansion before the end of 2025.Wang argues the move will be driven by liquidity management, not by attempts to support risk assets or Treasury yields.He predicts the Fed may need to inject $300–$500 billion annually to maintain control over short-term interest rates.Rising repo demand and an expanding Treasury General Account (TGA) are likely to pressure the Fed into action.Former Fed Insider Sees Balance Sheet Expansion ComingAccording to Joseph Wang, a former senior trader at the New York Federal Reserve’s open market division and now known as “The Fed Guy” on YouTube, the U.S. central bank is “highly likely” to resume balance sheet expansion before the end of the year.After nearly three years of quantitative tightening (QT), Wang believes the Fed will soon reverse course — not to prop up risk markets or manage Treasury yields, but to prevent losing control of short-term interest rates, a key tool for setting monetary policy.“Liquidity, Not Market Rescue”Wang pushed back against investors who claim the Fed will expand its balance sheet to avoid a liquidity crisis or to stabilize asset prices. Instead, he said the Fed’s next move would be a technical liquidity operation — a response to the structural tightening of reserves across the financial system.“If the Fed doesn’t inject more liquidity by purchasing securities,” Wang explained, “it risks losing the ability to control short-term rates — which means losing control of monetary policy itself.”Repo Demand and TGA Expansion Driving PressureAccording to Wang’s analysis, strong demand for repurchase (repo) agreements and the growth of the Treasury General Account (TGA) at the Fed are draining liquidity from the banking system. These factors, combined, are forcing the Fed toward renewed balance sheet growth — estimated at $300 billion to $500 billion per year.Such a move would mark the start of a new liquidity cycle, potentially reshaping the macro environment for both traditional and digital assets.Implications for MarketsIf the Fed does resume expansion, it could relieve funding stress and reignite risk appetite across equities, bonds, and crypto markets. However, Wang emphasizes that the purpose of such a policy shift would remain operational, not stimulative — aimed at stabilizing monetary transmission rather than sparking asset inflation.Market observers are closely watching liquidity conditions, as balance sheet expansion has historically coincided with renewed rallies in both U.S. equities and Bitcoin, which often acts as a proxy for global liquidity cycles.