In the Federal Open Market Committee (FOMC) statement released on October 29, 2025, the Federal Reserve announced a 25 basis point reduction in the federal funds rate target range to 3.75%-4%, citing moderate economic expansion, slowed job gains, a low but rising unemployment rate, and somewhat elevated inflation, with increased downside risks to employment.
The Committee emphasised close monitoring of data for future policy adjustments and noted two dissents: one favouring a 50 basis point cut and another no change.
A key focus was the decision to conclude the reduction of aggregate securities holdings (quantitative tightening, or QT) on December 1, 2025, to maintain ample bank reserves and avoid liquidity strains.
This ends the ongoing runoff, where up to $95 billion in maturing Treasury and agency securities were not fully reinvested monthly, which had reduced the balance sheet by approximately $2.2 trillion since June 2022 and gradually lowered reserves.
Starting in December, the New York Fed’s Open Market Desk will fully reinvest all principal payments: rolling over Treasury holdings by purchasing new issues at auction and redirecting agency mortgage-backed securities (MBS) payments into Treasury bills via secondary market purchases.
These bond purchases aim to stabilise the balance sheet size at around $6.5 trillion (22% of GDP) and prevent reserves from falling below the ample level needed for effective rate control, financial stability, and a resilient payments system, as reserves have declined to $3.0 trillion amid signs of tightening liquidity (e.g., firming repo rates).
Powell’s earlier October 14 remarks highlighted that QT’s end would be guided by indicators to ensure reserves remain sufficient, avoiding past strains like those in 2019, while defending the ample reserves framework where bond holdings back reserves and enable policy implementation without rapid asset sales.
In the post-meeting press conference, Chair Powell reiterated economic uncertainty due to the government shutdown’s data disruptions, described a softening labour market partly from AI-driven efficiencies, and stated a December rate cut is “not a foregone conclusion” amid policymaker divisions and stronger-than-expected growth; he downplayed long-term tariff inflation risks but offered no additional details on balance sheet actions beyond the statement.