Deutsche Bank has forecasted that the U.S. Federal Reserve will begin expanding its balance sheet through a new round of quantitative easing (QE) in the first quarter of 2026, marking a potential shift toward looser monetary policy. This prediction follows the Fed's recent decision to end its quantitative tightening (QT) process on December 1, 2025, after reducing the balance sheet from a peak of $9 trillion to approximately $6.6 trillion by allowing bonds to mature without reinvestment since 2022.
The bank's analysis, detailed in a November 7 report, cites slowing U.S. economic activity and tightening liquidity pressures as key drivers, which could prompt the Fed to act sooner than expected to maintain financial stability. Deutsche Bank, which accurately predicted the end of QT, emphasizes that renewed asset purchases—involving Treasury and mortgage-backed securities—would inject cash into the banking system, historically reducing borrowing costs and supporting asset prices across equities, bonds, and digital assets.
Implications for broader financial markets are significant, as previous QE cycles, such as during the 2020 COVID-19 crisis, led to surging valuations in risk assets. For cryptocurrencies, this could mirror past trends where increased liquidity fueled bullish momentum, particularly for assets like Bitcoin that thrive in low-interest-rate environments.
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