The timing of stopping balance sheet reduction sends a signal; the federal funds rate remains the Federal Reserve's preferred tool.

Jinse Finance reported that the Federal Reserve decided to halt its balance sheet reduction after a decline in bank reserves, indicating that officials are increasingly relying on the federal funds rate as the primary tool for implementing monetary policy and assessing liquidity conditions in the financial system. The Federal Reserve announced on Wednesday that it will stop reducing its holdings of U.S. Treasuries starting December 1. Previously, short-term money market rates had remained elevated for several consecutive weeks. Although the Federal Reserve stated it will continue to reduce its holdings of mortgage-backed securities and reinvest maturing funds into Treasury bills, it did not announce any additional liquidity measures to ease financing cost pressures.