Holding Rates Steady: The Beginning of a Systemic Shift? Let's discuss today's Federal Reserve October policy meeting. 1. Early this morning, the Fed announced it would hold rates steady, a decision passed 10-2 (Harmark and Cook advocated for a 25 basis point hike, with one less vote against than market expectations). Compared to the September statement, this statement upgraded the assessment of US economic activity from "solid" to "strong," removed the statement that "this policy action will help inflation return to the 2% target more promptly," and instead emphasized the need to accumulate more information to determine the appropriate policy stance. 2. Major Changes: Warsh stated at the press conference that starting in 2027, the Fed will have one meeting focused on macroeconomic monetary policy strategy, without interest rate votes or policy statements; in 2028, this number of strategic meetings will increase to two, while policy-setting meetings will decrease to six. Combined with the results of the five working groups established by Warsh expected to be released by the end of the year, we should see a series of actions led by Warsh to reform the Fed, and this reduction in the number of interest rate decisions should be the beginning of a broader shift in the Fed's system. 3. On the Economy, Inflation, and Employment Wash is optimistic about the current economic situation. He points out that GDP growth for the first half of the year has been revised upward from the previously estimated 1.8% to 2.4%, and the third quarter growth appears to have accelerated further. Regarding the dual mandate, Warsh stated that recent FOMC discussions "mainly focused on the price stability mandate." The employment situation is "quite positive," with the unemployment rate down from a year ago and the four-week moving average of unemployment insurance claims at "the lowest level in generations." 4. Financial and Credit Conditions There are signs of tightening to some extent. Wash said, "We have begun to see some changes in financial and credit conditions; conditions have tightened for some businesses and households, which is in line with our expectations. Market participants are becoming more cautious in their capital allocation." However, Warsh also emphasized that he would not characterize current financial conditions as "tight" overall, but rather describe them as helping to pave the path to price stability. Regarding investment in artificial intelligence infrastructure, Warsh acknowledged that rising interest rates have had an impact—credit spreads have widened for some assets, but there are also signs of tightening financial conditions for other assets. How to interpret Warsh's statement: 1) A close look at Warsh's statement reveals that he didn't explicitly state why interest rates wouldn't be raised this time; he only mentioned needing to gather more information. At the press conference, Warsh said he "neither wanted nor could he say financial conditions were tight," which is slightly hawkish. However, he also said financial conditions were tightening (rate hikes were having an effect), which offset the aforementioned hawkish tone. 2) The new communication framework: Opposition to forward guidance, no submission of the dot plot, and no prediction of the meeting's outcome. This signals that the Fed is deliberately narrowing its direct intervention in the financial markets and short-term guidance, emphasizing data dependence, frameworks, and strategic review. Overall, Warsh's statement wasn't as hawkish as expected, and remained within the final three frameworks of last night's forward guidance. My personal feeling is that his attitude is neutral, not strong enough to warrant a "pause in hawkishness." Of course, this pause isn't a dovish shift, but rather a "patient consensus" within the hawkish camp, requiring more data and information. This is understandable. Whether or not there will be a rate hike in December depends primarily on inflation data, which in turn depends on whether the situation in the Middle East changes in the next two months. Warsh, on the other hand, makes decisions based on current data, so it's indeed difficult to provide a clear forecast based on his framework. This post is sponsored by @bitget_zh, "Bitget US Stocks: Instant Entry, Smooth Trading"