Federal Reserve Balance Sheet Shrinks by $16.6 Billion as Markets Brace for December Rate Decision
The Federal Reserve’s balance sheet declined by 16.638 billion dollars over the past week, adding new momentum to expectations ahead of the upcoming FOMC meeting on December 10. The central bank is currently in a communications blackout period, leaving markets to rely solely on macro data and forecasts from major financial institutions.
The decline in the Fed’s balance sheet comes at a time when analysts increasingly expect the start of a rate-cutting cycle, driven by weakening labor market signals and slowing economic activity.
Economists Expect a December Rate Cut
A Reuters survey shows overwhelming consensus: 82 percent of economists anticipate a 25 basis point cut at the December 10 meeting. Most forecasts now point to a total of three rate cuts between December 2025 and April 2026, with the federal funds rate eventually drifting toward the 3.0 to 3.25 percent range.
But internal disagreements within the Federal Reserve remain significant. At least five voting members are reportedly opposed to further easing, reflecting concerns about inflation persistence and the potential for policy to become overly accommodative.
Bank of America: Policy May Become Too Loose
Bank of America expects a 25 basis point cut in December as well. Analysts warn that the combination of monetary easing and large-scale fiscal spending could make the Fed’s policy stance “too soft,” increasing the risk of inflation reacceleration later in the cycle.
Morgan Stanley: A Three-Step Cutting Path
Morgan Stanley’s base case also anticipates a 25 basis point cut in December, followed by two additional 25 basis point reductions in January and April 2026. While dissenting voices within the FOMC are expected, analysts believe Chair Jerome Powell will maintain a firm, cautious tone to avoid perceptions of over-easing.
JPMorgan: December Cut Now the Central Scenario
JPMorgan has shifted its outlook, abandoning expectations of a January cut in favor of a December move. Softening economic indicators and rising unemployment have pushed the bank to align with the broader consensus.
Goldman Sachs: Weak Labor Market Guarantees a Cut
Goldman Sachs frames the upcoming decision as nearly inevitable. According to its analysts, the weakening labor market has “practically guaranteed” a 25 basis point rate cut at the December meeting, as employment data continues to deteriorate.
BlackRock: The Fed Is Likely to Ease Again Next Week
BlackRock also expects the Fed to cut rates next week, citing the loss of labor market momentum. While the Fed’s balance sheet appears to be stabilizing, analysts emphasize that this does not imply a return to quantitative easing. Quantitative tightening is effectively over, but monetary policy is shifting toward a more supportive stance.
Market-Implied Rate Path
Market pricing reflects clear expectations for the coming months:
• December 10: cut by 25 bps to 3.50–3.75 percent
• January 28, 2026: pause
• March 18, 2026: pause
• April 29, 2026: cut by 25 bps to 3.25–3.50 percent
• June 17, 2026: pause
• July 20, 2026: pause
Investors expect a gradual, controlled easing cycle rather than an aggressive series of cuts.
BTCUSA Comment
The Fed’s 16.6 billion dollar balance sheet decline and a near-unanimous expectation of a December rate cut reinforce the view that U.S. monetary policy is entering a new phase. While weakening labor data supports easing, internal divisions within the FOMC highlight the risks of policy becoming too accommodative in a still-fragile inflation environment.
The coming meeting on December 10 may set the tone not only for U.S. macro performance but also for global risk assets, including Bitcoin and broader crypto markets. BTCUSA will continue monitoring rate expectations, labor market data, and the evolution of the Fed’s balance sheet as the easing cycle develops.
