Core Viewpoint - The recent statements by U.S. Treasury Secretary Mnuchin supporting a 50 basis point rate cut and predicting a total cut of 150-175 basis points for the year indicate an urgent debt crisis in the U.S., which is a rare occurrence as Treasury Secretaries typically avoid discussing Federal Reserve policies to maintain its independence [1][3]. Group 1: Economic Implications - The U.S. faces a staggering $37 trillion in national debt, with annual interest payments reaching $1.2 trillion, which is consuming the federal budget. A 300 basis point rate cut could save nearly $1 trillion annually for the White House, potentially funding several of Trump's policy commitments [3]. - The internal division within the Federal Reserve is unprecedented, with Vice Chair Bowman shifting to support a rate cut cycle, while Trump's nominee Waller publicly questions Powell's leadership, indicating political interference [3][5]. Group 2: Political Dynamics - Trump's actions to potentially replace Federal Reserve leadership, including nominating candidates who advocate for presidential control over Fed officials, threaten the independence established since the Fed's inception in 1913, raising concerns in global markets [5][7]. - If Powell is forced to resign, the yield spread on U.S. Treasuries could widen by 200 basis points, leading to significant volatility in global financial markets, with Deutsche Bank simulations predicting a more severe impact than Nixon's interventions in the 1970s [7]. Group 3: Inflation and Global Currency Trends - U.S. inflation is facing new challenges, with the core CPI rising to 3.1%, significantly above the Fed's 2% target, and 90% of U.S. importers planning to raise prices in the next three months, further exacerbating inflationary pressures [9]. - The trend of de-dollarization is accelerating globally, with countries like Saudi Arabia and Russia moving towards alternative currencies for trade, while central banks are increasing gold reserves, indicating a shift in the international financial landscape [11]. Group 4: Global Financial Order - The ongoing struggle between Trump and the Federal Reserve not only impacts the U.S. economy but also has profound implications for the global financial order, as the dollar's status as the world's reserve currency relies on the Fed's independence and the stability of the U.S. financial system [13]. - Continued political interference could hasten the decline of dollar hegemony, leading to significant changes in the global monetary system, presenting both challenges and opportunities for global investors [13].

Central Banks' Monetary Policy Divergence - The week marked a "super central bank week" with the Bank of Japan, the Federal Reserve, the Swiss National Bank, and the Bank of England announcing their interest rate decisions amidst rising tensions in the Middle East and varying inflation pressures [2][3][4]. Bank of Japan - The Bank of Japan is expected to maintain its benchmark interest rate at 0.5% despite a revised zero growth in Q1 GDP and high inflation, particularly with rice prices doubling over the year [2]. - The focus is on potential adjustments to its bond purchasing plan, possibly slowing the planned quarterly reduction from 400 billion yen to 200 billion yen, with a hint that any rate hike may be postponed until Q1 2026 [3]. Federal Reserve - The Federal Reserve is likely to keep rates unchanged, with a core CPI of 2.8% and weak non-farm payroll data showing an increase of only 139,000 jobs [3]. - Market attention is on the dot plot for any signals of potential rate cuts, with Citigroup predicting a total of 75 basis points in cuts later this year [3]. Swiss National Bank - The Swiss National Bank faces a critical decision, with a 69% probability of a 25 basis point cut to 0% or even returning to a negative rate of -0.25% due to a negative CPI of -0.1% and an 11% appreciation of the Swiss franc [4]. - Such a move could increase volatility in the euro-Swiss franc exchange rate and raise concerns for pension funds regarding liquidity management [4]. Bank of England - The Bank of England is expected to maintain its rate at 4.25%, but deteriorating labor market conditions and a slowdown in wage growth may set the stage for potential rate cuts in August or November [4]. - Current rates are still considered in a "tightening zone," providing ample room for policy shifts, which may put short-term pressure on the British pound [4]. Market Reactions - The escalation of the Middle East conflict, particularly Iran's threats to block the Strait of Hormuz, combined with central bank policies, has heightened market volatility [5]. - U.S. stock indices fell sharply, with the VIX fear index surging by 22% and oil prices spiking by 12% in a single day [5]. - A hawkish stance from the Federal Reserve could strengthen the dollar, further suppressing capital flows to emerging markets, while dovish signals from Switzerland and the UK could provide temporary relief for risk assets [5].

Core Viewpoint - China's economic data for April shows stable growth despite a complex external environment, with significant contributions from domestic demand and overall employment stability [1][4]. Economic Performance - In April, China's industrial added value increased by 6.1% year-on-year, while the service production index grew by 6.0% and retail sales of consumer goods rose by 5.1% [1]. - The urban surveyed unemployment rate decreased to 5.1%, indicating a stable employment situation [1]. - Fixed asset investment in China grew by 4.0% year-on-year from January to April, and total goods import and export value increased by 2.4%, reflecting resilience in foreign trade [3]. Policy Impact - The combination of macroeconomic policies in April has led to sustained industrial production growth, particularly in equipment manufacturing and high-tech sectors [3]. - The service sector has shown stable growth due to policies aimed at expanding domestic demand, with digital transformation and increased travel boosting information and business services [3]. - The effects of the "old-for-new" consumption policy continue to support stable market sales, particularly in basic living goods and some upgraded products [3]. Global Monetary Policy Trends - The Federal Reserve has indicated a reluctance to lower interest rates, with Chairman Powell noting the challenges posed by potential supply shocks and unstable inflation [3]. - The European Central Bank is considering further rate cuts, while the Bank of Mexico has reduced its benchmark rate by 50 basis points to 8.5% [3]. - The divergence in global monetary policies is expected to have significant implications for financial markets [4].