Will Trump take control of the Federal Reserve? Walsh Hearing Briefing:
Not much new from the hearing: What Walsh said was pretty much the same as what he wrote in his previous articles, so there weren't any surprising bombshells.
So what’s his game plan:
View on inflation: He thinks the current inflation metric used (core PCE) is inadequate and wants to switch up the algorithm (like using 'trimmed PCE'), which might show a lower inflation rate, giving him a reason to advocate for more rate cuts.
How to communicate with the market: He doesn’t want to do the 'dot plot' future rate predictions anymore; he believes the Fed should adopt a more vague approach like in the past to maintain some mystery.
However, this might leave the market even more confused and lead to greater volatility.
Regarding balance sheet reduction, he claims long-term they need to 'reduce the balance sheet' (pull back cash from the market), but this year it’s just not feasible.
Due to tight liquidity in the market and Trump's political pressure with midterms approaching, don’t expect any immediate action.
Can he make it? There’s potential, but also variables.
During the hearing, he was a bit evasive, not directly addressing some sensitive questions, which made him seem less than 'independent.'
Trump is likely to drop the investigation into current Chair Powell, which would clear the path for Walsh and allow him to better control the Fed.
What’s the impact on the market:
If Walsh really gets in, the first year he’ll likely lean 'dovish,' meaning he’ll favor loosening monetary policy. For instance, if the rules say they can cut rates by 1.5 times, he might just go ahead and cut a full 2 times.
With balance sheet reduction off the table this year, the overall monetary environment could become more lenient. This would be a good thing for assets outside of the dollar, like stocks and gold, but not so much for the dollar itself.
In summary: Walsh’s idea is to have the Fed ease up (cut rates) while keeping his communication vague. But whether he can secure that position still hinges on the final political chess game.
#特朗普 #听证会 $ETH
Not much new from the hearing: What Walsh said was pretty much the same as what he wrote in his previous articles, so there weren't any surprising bombshells.
So what’s his game plan:
View on inflation: He thinks the current inflation metric used (core PCE) is inadequate and wants to switch up the algorithm (like using 'trimmed PCE'), which might show a lower inflation rate, giving him a reason to advocate for more rate cuts.
How to communicate with the market: He doesn’t want to do the 'dot plot' future rate predictions anymore; he believes the Fed should adopt a more vague approach like in the past to maintain some mystery.
However, this might leave the market even more confused and lead to greater volatility.
Regarding balance sheet reduction, he claims long-term they need to 'reduce the balance sheet' (pull back cash from the market), but this year it’s just not feasible.
Due to tight liquidity in the market and Trump's political pressure with midterms approaching, don’t expect any immediate action.
Can he make it? There’s potential, but also variables.
During the hearing, he was a bit evasive, not directly addressing some sensitive questions, which made him seem less than 'independent.'
Trump is likely to drop the investigation into current Chair Powell, which would clear the path for Walsh and allow him to better control the Fed.
What’s the impact on the market:
If Walsh really gets in, the first year he’ll likely lean 'dovish,' meaning he’ll favor loosening monetary policy. For instance, if the rules say they can cut rates by 1.5 times, he might just go ahead and cut a full 2 times.
With balance sheet reduction off the table this year, the overall monetary environment could become more lenient. This would be a good thing for assets outside of the dollar, like stocks and gold, but not so much for the dollar itself.
In summary: Walsh’s idea is to have the Fed ease up (cut rates) while keeping his communication vague. But whether he can secure that position still hinges on the final political chess game.
#特朗普 #听证会 $ETH