HSBC China Wealth Insights: Will the Federal Reserve Embrace "Inflation Hawks"? Will the Interest Rate Path Change? | HSBC Global Wealth Podcast

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“The routes envisioned by Kevin Waugh will be influenced by the current market environment, internal disagreements within the Federal Reserve, capital markets, and U.S. fiscal constraints. Whether they can ultimately follow his desired path remains to be tested.”

1. Monetary Policy: Previously advocated a combination of “rate cuts + balance sheet reduction” to control inflation and lower interest rates

2. Financial Regulation: Supports easing regulations and reducing Basel Accord constraints on U.S. banks

3. Systemic Reform: Calls for systemic reforms at the Federal Reserve to rebuild credibility of monetary policy

1. Independence: Markets are confident in the Fed’s resistance to political pressure and its independence

2. Balance Sheet Reduction: Currently, U.S. financial market liquidity is not abundant, and there are risks in the credit market; blind balance sheet reduction lacks sufficient conditions

3. Interest Rate Path: Based on data, we maintain the view that the Federal Reserve will hold steady this year and next

Long-term government bonds may remain under pressure, with the yield curve steepening. We hold a neutral view on U.S. Treasuries, leaning slightly bullish on investment-grade bonds, with a duration preference of 5-7 years. We remain neutral on the U.S. dollar, expecting continued two-way volatility.

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The above insights are from HSBC China Wealth Insights. For more content, click on 【HSBC China Wealth Insights Column】.

Data sources: Wind, Bloomberg, HSBC Private Banking and Wealth Management. As of December 17, 2025. Past performance is not indicative of future results.

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