Monetary Matters with Jack Farley Joseph Wang: Fed Likely To Have To Expand Balance Sheet To Avoid Losing Control Over Repo Market
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Oct 30, 2025 
Joseph Wang, a former senior trader at the New York Fed and author at FedGuy.com, dives into the Fed's recent decision to halt quantitative tightening. He discusses the stress in the repo market and predicts the need for the Fed to expand its balance sheet to maintain liquidity. Topics include the implications of rising repo demand due to fiscal deficits, potential impacts on mortgage rates from MBS sales, and the balance sheet's role in controlling interest rates. Wang also examines stock market momentum driven by AI and the complexities of Fed independence.
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QT Pause Driven By Repo Stress
- The Fed stopped QT because repo rates rose as the RRP drained and reserves became scarce.
- Joseph Wang says repo and short-term funding signals forced the Fed to pause balance sheet runoff to avoid a 2019-style spike.
Fiscal Deficit Fuels Repo Demand
- Growing US fiscal deficits increase demand for repo financing and push repo rates higher.
- Wang argues rising fiscal issuance forces the Fed to add liquidity or lose control of short-term rates.
Watch For Fed Bill Purchases
- Expect the Fed to buy treasury bills as 'reserve management purchases' to add liquidity if repo rates stay elevated.
- Watch for bill purchases possibly starting as soon as December to calm money markets.