Fed December FOMC Minutes 2025: Why a Liquidity Crisis May Outweigh Interest Rates

The financial system might be running out of gas. While most eyes are on interest rates, Federal Reserve officials are quietly sounding the alarm on a tightening cash supply. The recently released Fed December FOMC minutes 2025 suggest that maintaining sufficient cash reserves is becoming a top priority to prevent sudden market disruptions.

Fed December FOMC Minutes Reveal Liquidity Worries

During the December 9–10 meeting, policymakers noted that bank reserves had dropped to levels they call 'ample.' However, this zone is notoriously sensitive. Even minor shifts in demand can cause overnight borrowing costs to spike, straining the entire financial plumbing. Some participants warned that these pressures are building even faster than they did during the 2017–2019 balance-sheet runoff, which ended in a messy liquidity crunch.

$220 Billion Plan to Stabilize Markets

To stay ahead of the risk, the Fed discussed purchasing about $220 billion in short-term Treasury securities over the next year. It's not a change in monetary policy stance—it's about keeping the gears turning. Officials also considered removing the cap on the standing repo facility to ensure banks have easy access to cash when they need it most.

The next test comes on January 27–28, 2026. Traders are currently betting heavily on a pause, with the CME FedWatch tool showing an 85.1% probability that rates will stay in the 3.50% to 3.75% range. However, the real story for 2026 might be how the Fed manages its balance sheet rather than how many times it cuts rates.