On December 1, #美联储恢复降息进程 , the Fed suddenly hit the pause button - the balance sheet reduction plan came to an abrupt halt. Why did this central bank, which had crazily engaged in point shaving during the pandemic and has been desperately trying to recover liquidity for nearly two years, suddenly slam the brakes?

On the surface, inflation is still above 3% and has not come down. But upon closer examination, it becomes clear that the Fed is playing a very careful game: economic growth is stalling, the heat of the job market is fading, should they continue to tighten? They fear it might directly extinguish the economy; relax their vigilance? They worry that inflation might return. Caught in this dilemma, they might as well pause and observe — this may be the choice with the least risk.

There is another more realistic consideration: a few years ago, the Fed was crazily buying bonds, which actually helped the government alleviate debt pressure. If it continues to massively sell government bonds now, the cost for the government to borrow money will skyrocket. Pausing the balance sheet reduction essentially also relieves pressure on the fiscal side. Monetary policy and fiscal policy have never been two parallel lines.

For the market, this is definitely a positive message in the short term. The phase of tight liquidity may have passed, and risk assets can finally catch their breath. But don't celebrate too early— the Fed's balance sheet is still nearly two trillion higher than before the pandemic, which means there isn't actually much less money in circulation, indicating that the market will be more easily differentiated.

The timing is even more subtle: the crucial economic data for the U.S. in October has been delayed, coinciding with the Fed's policy blackout period, causing the market to lose its sense of direction. Once sentiment loses its anchor, volatility will amplify—this also explains why the stock market and the crypto market have been so volatile recently.

My judgment is that the Fed has already sensed the risks of an economic downturn and is preparing in advance. As for whether a new round of easing will really come, it still depends on how subsequent inflation and employment data develop. But one thing is very clear: the strong stance of 'raising interest rates at all costs' has already softened. The market always moves faster than policy, and smart money has already started to redirect its flow. If you are also looking for investment directions, it might be a good idea to observe the movements of funds more closely - they are often more honest than the news.