The Federal Reserve has officially entered the Walsh era, and has been following Powell on social media for 18 years. They have been following this man for almost eight years and are also feeling emotional. From a personal perspective, Powell is not a long-term prosperous artist like Greenspan, nor is he a crisis innovator like Bernanke, but a typical "data-driven" executor. Under the multiple impacts of the pandemic, supply chain, geopolitics (from Russia and Ukraine to the Middle East), fiscal expansion, and high inflation, he stabilized the employment and financial system in a pragmatic and flexible manner, but also paid the price of inflation due to the "temporary" misjudgment in the early stage. Let's also talk about the gains and losses of Powell's two terms in office. Main achievements: decisive crisis response, strong employment resilience, and independent protection worth noting 1. The 2020 epidemic relief measures include textbook level zero interest rates and unlimited QE. The balance sheet has exploded from 4 trillion yuan to 9 trillion yuan, and with the support of the government, the recession has been suppressed for two months. Employment has rapidly fallen from the peak of the epidemic to a low of 3.5-4%. The average low unemployment rate throughout the entire term and the strong labor market have become the biggest fundamentals of the US economy. The quick response of Powell's team has played a significant role in avoiding financial collapse and a second recession. 2. The soft landing was relatively successful, with timely tightening and correction in the later stage. In 22-23, aggressive interest rate hikes were implemented to suppress inflation, while in 24-25, cautious adjustments were made under data-driven conditions to avoid a hard landing. The dot matrix and press conferences have repeatedly reflected the concept of "data dependence": patience for strong employment, and slowing down the pace of interest rate cuts due to fluctuating inflation. This has a stabilizing effect on liquidity management and market expectations, especially in the context of fiscal bond issuance and reverse repurchase consumption, slowing down the signal of balance sheet reduction or adjustment pace, which actually benefits the marginal liquidity of risk assets. 3. Defending independence is the greatest legacy. Faced with political pressure (such as insults and investigations during the Trump era), Powell persisted until the end and even stated that he would continue to serve as a director/interim chairman until the investigation was completed. This is crucial in the era of partisan polarization, as it prevents the Federal Reserve from completely becoming a fiscal/administrative vassal. As mentioned in previous posts, this has positive implications for market confidence and the external environment of the US China financial game - an independent central bank can make capital flows more predictable. 4. The communication style is plain and the internal consensus is maintained well. Although I do not have a PhD in economics, it is important to explain complex policies clearly in plain language for managing market expectations. Main "losses": inflation misjudgment is most obvious, policy path volatility is large, and the framework is biased towards employment 1. The judgment of "temporary" inflation in 2021 was the biggest mistake, underestimating supply shocks and fiscal spillovers, which led to inflation spiraling out of control to a 40 year high in 2022 and only being corrected aggressively later. Service inflation, wage and energy transmission have repeatedly appeared, and I have repeatedly emphasized in multiple CPI and non farm posts that "deviation between data and expectations" is far more important than absolute values, while Powell's previous framework (average inflation target) was loose, sacrificing some price discipline. The average inflation during the term is higher than the target, and both household purchasing power and asset pricing have paid tuition fees in some periods. 2. Path dependence and side effects - rapid shift after early gradual interest rate hikes, 2022 banking pressure (SVB, etc.) exposes regulatory shortcomings; The pace of interest rate cuts in the later stage is entangled with politics/elections, and the dot matrix chart has repeatedly raised interest rate expectations and reduced the number of interest rate cuts, causing market fluctuations. Under the dual impact of energy and tariffs, holding back or discussing the possibility of interest rate hikes indicates that there is still a lag in judgment. The observation that AI slows down productivity growth and instead pushes up neutral interest rates also aligns with my tracking of capital expenditures and neutral interest rates. 3. The response to fiscal monetary interaction is not forward-looking enough. In the era of high deficits, the pricing power of a single interest rate signal is weakened, and the intervention of finance ministers and others is increasing. During Powell's tenure, the government yearned for low interest rates, but it was difficult to fully meet inflation constraints. Liquidity was repeatedly pumped and released between TGA, balance sheet reduction, and bond issuance, which significantly amplified the volatility of risk assets. I'll watch Walsh's performance in the next few years