In a notable pivot, the Federal Reserve announced at its October 29, 2025 meeting that its programme of quantitative tightening (QT) will formally end on December 1. Going forward, the central bank will reinvest the full principal from maturing Treasury securities rather than allowing them to roll off. 
Here, we take a positive view of this move—arguing that it marks a welcome stabilisation in liquidity conditions, a boost for credit dynamics, and a prudent shift toward supporting the economy.
Why this is a constructive shift
Easing liquidity stress
The Fed’s balance sheet reduction during QT drained sizeable reserves from the banking system and pushed short-term funding markets into strain. The Economic Times+3Financial Times+3Reuters+3 By stopping the runoff, the Fed signals it is prioritising smooth functioning of money markets and avoiding the risk of a funding crunch.Improved credit and lending backdrop
With QT ending, banks are likely to have greater reserve cushions and less pressure in wholesale funding markets. This should improve the prospects for bank lending, credit availability and thus support investment and growth.Signal of policy transition rather than sudden easing
Importantly, this move doesn’t constitute an outright shift into full-blown quantitative easing (QE) or a “money-printing” spree; rather, it is a transition to balance-sheet maintenance (reinvesting rather than contracting). vanirassets.com+1 That gives the Fed flexibility to respond to changing conditions without triggering market alarm.Reduce tail-risks of financial instability
By ending QT when reserves were approaching thinner levels, the Fed lowers the risk of unintended disruptions in the repo and inter-bank funding markets (which in prior episodes have caused significant volatility).
What to watch, and why optimism should be tempered
While ending QT is positive, the Fed emphasised that future decisions remain data-dependent and that a rate cut in December is not guaranteed. 
The economy still faces inflation above target, labour-market wobbliness, and global uncertainty. The shift is supportive, but not a guarantee of easier conditions.
Markets may have anticipated a pivot; the “positive surprise” element is limited, so relative gains may be modest.
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