The Federal Reserve's Next Move: Will There Be a Big Easing in 2026? Don't Dream About It.
The Federal Reserve’s dot plot just announced: two rate cuts in 2026, another cut in 2027, and only reaching normal interest rates in 2028. This means that everyone's hopes for a 'big easing' are completely dashed, and the logic that CZ mentioned about the 'Federal Reserve easing lifting the market' has fallen flat.
Let’s talk about the Federal Reserve buying $400 billion in government bonds—many people think it’s a 'market rescue'? Wrong.
This $400 billion is an RMP tool; it’s not about stimulating the economy or actively easing, but rather filling in the 'holes' in the banking system: at the end of the year, banks need to manage cash flow, pay taxes, and settle with businesses, and the liquidity pressure is too high. This operation is purely 'stability maintenance', completely different from the active expansion of QE.
In simple terms: QE is 'adding water', QT is 'withdrawing water', and RMP is 'scooping back the water that was spilled'—it only fills the holes, without adding new water.
So this is not a market rescue, but the Federal Reserve controlling 'risk': RMP will remain tight before April 2026 (because the treasury needs to raise funds for taxes), and after April, with less liability pressure, the amount of government bond purchases will go down.
What truly determines liquidity has never been RMP, but whether SLR is relaxed, whether banks can expand their balance sheets, whether the treasury provides subsidies, and whether the Federal Reserve will change ON RRP rules.
Next, focus on two key data points: the non-farm payrolls on December 16 (with November data released on the 12th), which are likely to be poor—November saw a government shutdown in the U.S., significantly impacting the economy; even more crucial is the January CPI. If the January CPI doesn't drop after the interest rate cut in October, the Federal Reserve might continue to reduce its balance sheet.
To summarize: the current market environment is not optimistic at all. A big easing by the Federal Reserve in 2026? At least for now, don't even think about it.
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