Monetary Policy & Liquidity - The Federal Reserve is expected to halt quantitative tightening (QT) in a matter of months to ensure smooth money market function and prevent it from becoming a news item [2][3] - The discussion about the number of rate cuts is focused on the next year, influenced by personnel changes and politics, while this year, two more quarter-point (0.25%) tightenings are anticipated [3][4] Financial Stability & Risk - Recent bankruptcies in the auto sector raise concerns about potential cracks in the system, suggesting hidden issues in opaque areas of finance due to prolonged risk-taking by investors [5][6] - While balance sheets are generally in better shape compared to past expansions, the economy is more vulnerable to adverse shocks that could trigger nonlinear events like bankruptcies and job losses [7][8][11] Economic Outlook - Expansions don't die of old age, but the economy is flying "a little slower, a little closer to the ground," making it more susceptible to adverse shocks [10][11] - The government shutdown could potentially reduce GDP by a quarter-point (0.25%) per week if it continues, although the private sector is large enough to absorb the sectoral shock [13] Government Shutdown Impact - The macroeconomy should be able to endure the government shutdown, which is considered a sector-specific and regional shock [14][15]

Federal Reserve Policy - The yield on the 10-year Treasury note fell below 4%, reaching its lowest level since September 17th [1] - Fed Chair Powell suggested, but did not explicitly state, that rate cuts are likely to continue [3] - The Fed judged it appropriate to take another step toward a more neutral policy stance at its September meeting [4] - Powell indicated the Fed might soon halt the reduction of its balance sheet (QT) due to signs of tightening liquidity conditions [6] - Powell's comments did not decisively endorse future rate cuts, but he also did not push back against market expectations for two cuts this year [8] Economic Outlook - Rising downside risks to employment have shifted the Fed's assessment of the balance of risks [4] - Data suggests higher downside risks for employment and inflation, primarily due to tariffs rather than a broader inflation issue [5] - Prior to the shutdown, data indicated the economy was on a firmer growth path [5] - The Fed is monitoring liquidity conditions, including repo rates [6] Market Observations - The market reacted positively to Powell's comments regarding the potential halt of balance sheet reduction [6] - The market firmly expects two rate cuts this year [8]

🎙️ Alice Liu (@AliceCrypto3), Head of Research at @CoinMarketCap, previews Jerome Powell’s speech today in our upcoming Markets Outlook interview:“All eyes are on Powell’s first public appearance since the September rate cuts. With weaker job data and a looming government shutdown, markets are watching closely for hints of another cut.”Thanks @Stablecoin 🤙 for being a sponsor of CoinDesk media network. ...

BREAKING: 🇺🇸 FED’S Bowman signals the possibility of two more rate cuts this year. https://t.co/rTt9X1MqZW ...

Monetary Policy - Fed Chair Powell is scheduled to speak on Economic Outlook and Monetary Policy at 12:20 P.M ET [1] - The market is anticipating whether Powell will mention potential rate cuts [1]

Philadelphia Fed President Anna Paulson signaled support for two more 0.25% rate cuts this year, citing tariff-driven price effects https://t.co/sg1LcfperA ...

Economic Outlook - The economy is experiencing a K-shaped recovery, with a booming industrial renaissance contrasted by headwinds facing consumers [2] - Recent China news poses a slight headwind to the consumer outlook due to potential upward pressure on prices [5] - Strong growth is observed in red book same store retail sales, restaurant visits, and hotel demand, suggesting the economy is still performing well [10] - A key question for the Fed is whether the slowdown in the labor market is due to slower supply (less immigration) or lower demand [8][9] Inflation and Monetary Policy - The biggest underappreciated risk is that the fight against inflation is not over [15] - There's a risk that the Fed cutting rates due to slowing immigration could lead to more inflation, especially with tariffs and a weaker dollar [11] - The consensus view is that inflation over the next 12 months will be 3%, significantly higher than the Fed's 2% target [14] - Retailers are discussing the impact of tariffs on their costs and pricing strategies [13] Gold Market - Gold prices are rising due to inflation risks, Chinese household buying, and central banks divesting from US treasuries [18][19] - Chinese households are diversifying into gold due to limited investment options [21] - Central banks are price insensitive buyers of gold due to sanctions [20]

Market Analysis & Investment Opportunities - Cryptocurrency market experienced a significant liquidation event, with $200 million liquidated in 15 minutes, attributed to factors including global trade war concerns [1] - Despite market volatility, the overall market structure is perceived as bullish, presenting potential buying opportunities similar to previous cycles [2][3] - The analysis suggests a major buying opportunity for Bitcoin, Ethereum, and Solana, with confidence expressed in quality cryptocurrencies [3][4] - Traditional banking institutions like Morgan Stanley and BNY Melon are increasingly integrating cryptocurrency, indicating a positive trend for Bitcoin, Ethereum, and Solana [10] Macroeconomic Factors & Regulatory Landscape - Potential Federal Reserve rate cuts are anticipated, influenced by government shutdowns and restrictive policies, with expectations of rate cuts in the near term and potentially two more in 2026 [5][6][7] - Market structure clarity act is progressing, aiming to establish clear crypto rules and resolve ambiguities regarding the classification of crypto assets [15][16][17] Bitcoin's Role & Societal Impact - Bitcoin is recognized as a tool for bypassing government-imposed exchange rates and aiding individuals in countries with collapsing economies or authoritarian regimes [11][12][13][14] - Bitcoin is envisioned as a component of national reserves, contributing to rebuilding economies and providing financial freedom [12]

US-China Trade Relations & Tariffs - The market reacted sharply to President Trump's threat of massive new tariffs on China, with the S&P 500 down approximately 2% and the tech sector experiencing a more significant decline [4] - The expert suggests that the tariff issue is not solvable by monetary policy and recommends the Fed to ignore it [5] - China's cut in access to rare earths is viewed as a reason for potential retaliation from the US [4] Monetary Policy & Inflation - The expert believes that the Fed should hold steady and not continue rate cuts, as cutting rates would validate passing on price increases and potentially fuel inflation [8][9] - The expert suggests that the Fed signaling it does not want to validate price increases would put a lid on inflation [8] Labor Market Analysis - The labor market is described as soft but not significantly different from what is expected in an extended expansion [10] - Wages for lower-end workers are performing well, while supervisory workers have experienced lower pay increases [10][11] - The Atlanta Fed wage tracker signals no serious problems in the labor market [11] Personal Considerations - The individual withdrew his name from consideration for a government position due to personal considerations, including family involvement and satisfaction with his current job [1][2][3] - The expert finds government service to be more painful and hostile than in the past [2]

Monetary Policy Stance - The speaker believes that cutting rates is still necessary, but caution is warranted due to conflicting signals from the labor market and GDP growth [1] - The market has already priced in sequential rate cuts through the end of the year, which the speaker considers cautious enough if implemented in quarter-point increments [3] - A more aggressive rate cut, such as 75 basis points, carries a higher risk if the economic outlook is misjudged [4] - Gradual adjustments of 25 basis points allow for flexibility as new data becomes available [4] Economic Indicators - The labor market is weak, but GDP growth is strong, with forecasts near 4% [1] - Negative job growth is inconsistent with 4% GDP growth, suggesting an imbalance that needs to be resolved [1] - The labor market and GDP growth must align, either through a labor market rebound or a GDP growth slowdown [2] Policy Implications - If the labor market rebounds and growth remains strong, there is less need for rate cuts [2] - If GDP growth slows down, the labor market situation necessitates further rate cuts [2] - Policy decisions should be made cautiously to avoid significant errors in either direction [3]