The Fed's move goes far beyond a policy tweak—on December 11th, they announced the removal of the overall cap on the standing repo facility. In simple terms, they've effectively eliminated that "safety valve."

The previous framework was like this: set an overall cap to ensure liquidity has a "ceiling." Now, it's different. Eligible counterparties can each submit up to $40 billion per operation, with no total amount limit—this is the so-called "unlimited ammunition."

**Why is the Fed suddenly doing this?**

Powell's statement was very candid: "The standing repo facility is a key tool for maintaining the federal funds rate target range when pressures in the money market rise." An unmistakable defensive stance. Will history repeat itself? The lesson from 2019 is still fresh—the US repo market collapsed, overnight rates spiked to 10%, and the Fed was caught off guard. This time, they are acting proactively.

What is the current situation? The reserve balances of US financial institutions have fallen below $3 trillion for eight consecutive weeks. The reverse repo volume has approached 2019 levels. Year-end settlements, regulatory requirements, rising financing rates—these factors stack up, and liquidity stress is no exaggeration. The Fed has simply equipped the "unlimited firepower." Instead of waiting for a crisis to erupt and scrambling, they prefer to open the liquidity floodgates in advance.

What does this mean for the market? In the short term, financing pressures on financial institutions will ease. In the long term, moving from "setting limits" to "unlimited" liquidity management reflects a reassessment of financial stability— they believe the risks are now significant enough to justify this approach.