Charles Schwab's Hong Kong Senior Vice President and Financial Consultant, Lin Changjie, stated that despite increasing political pressure to cut rates, the Federal Reserve's decision to maintain interest rates within the 3.5% to 3.75% range reflects its continued data-dependent approach to policymaking. With the inflation rate slowing to 2.7% in December and gradually approaching the Fed's 2% target, price pressures are clearly moderating. However, due to the resilience shown by key economic indicators, the current situation has not yet become excessively tight. The unemployment rate has stabilized at 4.4%, indicating that while labor market demand is cooling, supply is also slowing down. He pointed out that this balance gives the Fed sufficient confidence to maintain its current policy stance. Unless there is a substantial shift in inflation or the labor market, the Fed is likely to continue this data-dependent policy approach until at least May 2026. He mentioned, however, that US monetary policy is currently in an extraordinary period. The escalating public disputes between monetary policy independence and the fiscal authorities have brought increased scrutiny to the Fed's institutional credibility. This independence remains the cornerstone of global confidence in the US dollar, US Treasury bonds, and the broader US capital markets. He stated that investors' focus is shifting from inflation data and employment reports to the future direction of the central bank itself, especially with Fed Chair Jerome Powell's term set to expire on May 15, 2026. For market confidence in the coming months, the preservation of the Fed's independence could be just as crucial as the path of interest rates.
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