Liquidity Returns: Fed’s Third Cut and $40B Purchases Set Bullish Backdrop for Market

TLDR:

• The Fed confirmed its third straight rate cut, reinforcing expectations for a gradual easing path into next year.
• Powell acknowledged weak labor conditions and overstated job gains, adding context to continued policy adjustments.
• The Fed will buy $40B in T-bills over 30 days, with elevated purchases set to extend liquidity into the markets.
• Policymakers avoided any reference to renewed tightening, framing a steadier environment for risk-asset behavior.

Fed FOMC actions signaled a renewed flow of liquidity after the central bank confirmed its third straight rate cut and introduced a new round of Treasury bill purchases. 

The latest meeting pointed toward a changing landscape, with policymakers easing pressure while closely monitoring economic data. Market participants noted the clearer shift in tone, especially as the central bank prepared to inject fresh liquidity through targeted purchases.

The announcement followed months of cautious communication, yet the details revealed a different approach. 

Chair Jerome Powell acknowledged soft labor conditions and confirmed that previous job gains had been overstated by 60,000. These adjustments offered context for the continuing reductions and strengthened the case for a more flexible policy direction.

Liquidity Returns Through Treasury Bill Purchases

A message from analyst account Bull Theory on X captured the core of the meeting’s liquidity angle. 

The post stated that the Fed planned to buy $40 billion in Treasury bills over the next 30 days, beginning December 12, and that elevated purchases would continue for several months.

These actions are often used to guide liquidity back into financial markets without describing them as formal stimulus.

Treasury bill operations tend to move quickly through the system, creating room for markets to adjust smoothly. The renewed activity offered investors a clearer sense of how liquidity may develop in the short term. 

Powell confirmed that decisions would be made meeting to meeting, giving policymakers freedom to respond to incoming labor and inflation numbers.

The combination of weakened labor indicators and revised employment statistics supported the direction taken by the central bank. 

Powell stated that a rate hike was not part of anyone’s base case, and projections pointed toward controlled reductions rather than renewed tightening. This helped frame expectations around the pace of easing.

Third Rate Cut Shapes a Supportive Backdrop

The Fed FOMC confirmed a 25-basis-point reduction, extending the current sequence of adjustments. 

Policymakers acknowledged that inflation remained above target, yet the tone reflected more confidence that price pressures were easing. With the committee avoiding any mention of returning to higher rates, markets viewed the communication as part of a broader shift.

Modest reductions paired with liquidity injections created a clearer structure for short-term market direction. 

Treasury bill purchases added another layer, offering support during a period of economic recalibration. Investors interpreted the combination as a steady move toward conditions that often support risk markets, especially with no reference to tighter policy.

Bull Theory’s post noted that crypto and other risk assets generally respond to liquidity rather than rhetoric. 

The gradual easing, revised labor data, and targeted purchases formed the type of foundation that often precedes stronger market performance. While volatility is still possible around data releases, the broader environment now reflects a shift toward renewed liquidity.

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Source: https://blockonomi.com/liquidity-returns-feds-third-cut-and-40b-purchases-set-bullish-backdrop-for-market/