If Woshuo were to lead the Federal Reserve, the policy framework might present a complex combination of "preemptive rate cuts and balance sheet reduction." Its core logic is: on one hand, responding to the White House's demand to lower financing costs by cutting interest rates, with 1-3 rate cuts possibly implemented by 2026; on the other hand, aggressively shrinking the balance sheet to hedge against the effects of liquidity easing. The contradictions of this policy mix are significant: balance sheet reduction could push up long-term interest rates, counteracting the rate cut objectives, and the actual interest rate path will heavily depend on inflation data. Woshuo advocates that AI-driven productivity improvements can suppress inflation and create room for rate cuts, but if inflation rebounds, its hawkish stance may re-emerge. In the medium to long term, the independence of the Federal Reserve may strengthen, with policy focus shifting toward supply-side reforms and easing financial regulation, but balancing political pressure and economic data constraints will be necessary.
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If Woshuo were to lead the Federal Reserve, the policy framework might present a complex combination of "preemptive rate cuts and balance sheet reduction." Its core logic is: on one hand, responding to the White House's demand to lower financing costs by cutting interest rates, with 1-3 rate cuts possibly implemented by 2026; on the other hand, aggressively shrinking the balance sheet to hedge against the effects of liquidity easing. The contradictions of this policy mix are significant: balance sheet reduction could push up long-term interest rates, counteracting the rate cut objectives, and the actual interest rate path will heavily depend on inflation data. Woshuo advocates that AI-driven productivity improvements can suppress inflation and create room for rate cuts, but if inflation rebounds, its hawkish stance may re-emerge. In the medium to long term, the independence of the Federal Reserve may strengthen, with policy focus shifting toward supply-side reforms and easing financial regulation, but balancing political pressure and economic data constraints will be necessary.