[Institutions Expect the Federal Reserve to Launch Reserve Management Purchase Program as Early as January 2026] The Federal Reserve concluded its balance sheet reduction on December 1, with bank reserves dropping to levels indicative of funding stress. The secured overnight financing rate tested its upper limit, signaling that the U.S. banking system is gradually entering a state of liquidity strain. The most significant signal from the FOMC may not be a 25 basis point rate cut, but rather the strategic direction of the balance sheet. The Federal Reserve is expected to outline how it will transition to the Reserve Management Purchase Program. Evercore ISI predicts that this program could begin as early as January 2026, with approximately $35 billion per month allocated to purchasing Treasury bills, leading to an annual increase of over $400 billion in the balance sheet.