The interest rate decision was made in the early hours of Thursday, and the current bond market still gives a 40% chance that Walsh will raise interest rates this time, which is not a common scenario in the past. Why? The core reason is naturally the "data dependency+low communication" under the new framework of Walsh Since taking office in May, Walsh has clearly promoted communication and framework reforms: 1) significantly shortened statements, removed traditional forward-looking guidance language (no longer implying loose or tight bias), and emphasized that "statements only give facts"; 2) Establish five working groups, including communication, balance sheet, data sources, productivity and employment, and inflation framework, to systematically review existing practices. 3) Strongly reiterating "stable delivery prices", "zero tolerance" for sustained high inflation (inflation has been above the 2% target for over 60 consecutive months), and downplaying the employment balance statement in the dual mission. He himself did not submit personal dot matrix forecasts and stated that the market should price more based on its own interpretation of the data, rather than "reflecting" the views of the Federal Reserve. The result is that the market has lost its anchor that was previously 'guided'. In the Powell era, officials' speeches, statement wording, and dot plots would align with expectations in advance, and the probability would highly converge towards meetings. The current policy path is more 'data-driven with the possibility of sudden action', and the market must price the possibility of unexpected interest rate hikes on its own, especially during the stage when the new chairman is building credibility. This directly drives up short-term interest rate volatility and tail risk premium - the bond market (federal funds futures) pays protection costs for the scenario of "if inflation risk suddenly worsens and the committee chooses to take immediate action to strengthen the signal". This actually brings higher risk premiums and volatility, rather than a smoother path. Although from a personal perspective in the morning tweet, it is highly likely that there will be no action this time, we cannot ignore the tail risks. Because the current environment also has specific catalysts that support high uncertainty: 1) Iran Conflict and Energy Prices The tension between the United States and Iran has been fluctuating (with threats, strikes, and temporary agreements in the Strait of Hormuz), and oil prices have fluctuated dramatically, directly pushing up the risk of inflation tail. Even though the June CPI was slightly softer than expected, the market is still concerned about the transmission of energy to the core and services, or the escalation of conflicts forcing the Federal Reserve to respond faster. The probability of oil prices and interest rate hikes is highly correlated in the near future. 2) New Chairman's Reputation and Signal Requirements After taking office, Walsh's first meeting has been biased towards hawks (with a concise statement and emphasis on price stability), and the market is concerned that he may choose to take "early action" to establish anti inflation determination, especially when there are still upward risks in the data. The lack of guidance means that the "live meeting" attribute is stronger, and the tail (unexpected interest rate hike) is priced higher. Simply put, the 40% probability of a rate hike is due to the significant weakening of forward guidance under the new Chairman Walsh's framework, coupled with geopolitical and data uncertainty. The market is paying for tail risk protection, rather than using rate hikes as a benchmark scenario. Nowadays, all kinds of analyses are deductions and probabilities, and ultimately it depends on how the interest rate decision is made in the early hours of Thursday? At the same time, pay attention to the wording of the statement (whether to further streamline or reiterate price stability) and the statement made by the Walsh press conference (he may continue to give less guidance). 1) If it remains stable, the market may quickly shift its focus to September and continue to pay attention to subsequent data (employment, inflation, oil prices) 2) If there is an unexpected interest rate hike, the narrative of "data+credit priority" under the new framework will be strengthened, and the market will further revise the interest rate path upwards. At the same time, it will quickly reprice the price "higher and longer", and financial conditions will naturally tighten even more. Risk assets continue to be under pressure. It can be said that this pricing itself is a reflection of the market adaptation process under the new communication paradigm.