Institution: Walsh's Statements Indicate a Bias Towards Rate Cuts

On April 22, a report from China International Capital Corporation stated that Federal Reserve Chair nominee Kevin Walsh attended a Senate Banking Committee hearing, revealing a core policy stance of “simultaneously reducing the balance sheet and cutting interest rates.” On the balance sheet front, he explicitly opposed normalizing quantitative easing (QE) and advocated for a gradual and orderly reduction of the Federal Reserve’s asset size, withdrawing from quasi-fiscal responsibilities to return to a focus on monetary policy. On the interest rate front, although he did not make explicit commitments, his statements have shown a tendency towards rate cuts. In our view, Walsh’s policy proposals represent not only an adjustment to the monetary supply mechanism but also an extension of the ‘America First’ strategy in the monetary realm amid rising anti-globalization sentiments—shifting from being a ‘global central bank’ that endlessly supplies liquidity to the world, to a new approach that firmly controls the total monetary supply, focuses on domestic productivity, and emphasizes monetary sovereignty. We believe this shift indicates that the narrative of continued excess dollar liquidity will face correction, and assets that solely rely on liquidity-driven gains, benefiting from ‘dollar overproduction,’ may come under pressure.