The recent volatility in expectations for Federal Reserve interest rate cuts has led to corresponding turbulence in global capital markets. The central question on the market's mind is: when will the policy turning point arrive? Against the backdrop of the "East rises, West declines" macro narrative, how should investors position their offensive and defensive strategies? To address these hot topics, we present insights from Liao Bo, Chief Macro Analyst at Northeast Securities Co.,Ltd..

Liao believes that Waller is driving a sweeping reform of the Federal Reserve's functional boundaries. For a considerable period, US monetary policy has been deeply intertwined with fiscal policy. Looking ahead, the Fed may use balance sheet reduction (quantitative tightening) as a tool to guide the flow of its issued currency towards the real economy, aligning with the strategic goal of reshoring manufacturing to the United States.

Regarding the monetary policy decision-making model, Liao anticipates that Waller will place greater emphasis on trend variables for inflation and employment, moving away from the previous "data-dependent" approach. While the Fed's dual-mandate framework of "inflation and employment" will remain, the criteria for identification and measurement may undergo adjustments.

Liao states, "There is little possibility of a Fed rate hike within the year," noting that the Fed has retained the option to cut rates.