Deutsche Bank analysts predict the Federal Reserve will resume expanding its balance sheet in the first quarter of 2025. This move signals a potential shift in monetary policy aimed at injecting liquidity into the market. The expansion would counteract the effects of quantitative tightening and provide additional reserves to the banking system. Market observers suggest this decision could be driven by factors such as concerns about bank reserves or a desire to maintain stability in the financial system. An expanding balance sheet involves the Fed purchasing assets, typically government bonds, which increases the money supply. This action can lower interest rates and stimulate economic activity, but also risks inflation if not managed carefully. The effects on inflation are usually seen in the longer term as an immediate effect may not be visible. ```