AI Boom vs. Tight Liquidity: Will the US Stock Rally Continue?
Grand View · Weekly Interest Rate Analysis | Warsh's Congressional Hearing! Could Oil Prices Return to Around $90?!
The nth202607phase
According to CME FedWatch data, with the nextFOMCmeeting still3 daysCurrently, the market expects that the probability of maintaining interest rates3.5%-3.75%(Current) Probability of no change is100.0%. Compared to one day ago (April 25), the probability of remaining unchanged is99.0%away, market expectations remain largely stable; compared to a week ago (April 18), the probability of no change is99.0%, showing a high level of consensus in the market regarding the Fed maintaining the current interest rate range; compared to a month ago (March 27), the probability of no change was93.8%、Interest rate hiketo3.75%-4.00%Probability is6.2%, and nowthe market is confident that the Fed will remain on hold at the April 30 interest rate meeting.
Fed Chair Transition: Warsh’s Hearing 'Debut' Takes Center Stage
Last week (April 20–April 26），Fed Chair Nominee WarshConfirmationHearingBecoming the market focus. Local timeOn April 21，US Senate Banking CommitteeJustKevin Warsh's Federal Reserve ChairnominationheldHearing. Since being nominated in January this yearSince US President Trump nominatedfor the next Federal Reserve Chair,Kevin Warshhas kept a low profile. ThisHearingmarks his 'debut,' offering the market an optimal chance to observe his policy stance.
Kevin WarshInHearinghearing that 'the Fed now needs to transform its policy implementation model.' These transformations include newInflationtarget frameworks, new policy tools, and new communication methods. He criticized the Fed: 'The Fed has failed to meet its objectives,' pointing out fatal policy errors made in 2021 and 2022 that continue to have repercussions today. 'The Fed has lost its direction,' overstepped its bounds, and became entangled in politics due to its own choices.
InIndependenceissues,Kevin Warshemphasized 'I will remain independent ofTrumpthe President,' and stated 'Trumpnever asked me to commit to any specific meetingInterest rate cut.' He also stated that if his position is confirmed, he will sell undisclosed assets. Regarding the policy path,Kevin Warshsaid 'We have a brief window to work onreducing inflation,' and added 'Inflation is not caused by excessive economic growth」。
CICCPointed out,Kevin WarshInHearingexpressed the core policy stance of 'Balance sheet reductionandInterest rate cut' on two parallel tracks: at the balance sheet level, he explicitly opposed the normalization of Quantitative Easing（Quantitative Easing (QE)), advocating for a gradual and orderly compression of the Fed's balance sheet, exiting quasi-fiscal responsibilities to return to its monetary policy role; at the interest rate level, although no explicit commitment was made, his statement already showed a tendency towards Interest rate cut.
Powell Survey Controversy: DOJ Terminates Investigation
Another major development last week wasU.S. Department of JusticeCorrectInvestigation into Federal Reserve Chair Powellhas come to an end.U.S. Department of Justicesaid on Friday that it would conclude the investigation intoFederal Reserve Chair Powellofinvestigation. This move is widely expected to pave the way forSince US President Trump nominatedfor the position of Federal Reserve ChairKevin Warshpaving the way for taking over as the Federal Reserve Chair.
Previously, U.S. prosecutor Jeanine Pirro stated that she would halt the investigation intoPowellthe construction costs of the Federal Reserve building.investigation. According to multiple sources, it is expected thatU.S. Department of Justicewill terminate as early as Friday its criminal probe intoFederal Reserve Chair Powell's case.investigation。
However,nominationThe process still has uncertainties.Tim Scott, Republican Senator from South CarolinaClearly stated that he will not support the appointment of any Fed officials until the Department of Justice's investigation intoPowell's investigationis concluded, adding a degree of uncertainty to the subsequentKevin Warshofnominationprocess.US President TrumpHe indicated that he would be disappointed if the new Fed Chair does notInterest rate cut, express disappointment.
Internal division: Dovish dominance
Kevin WarshAlthough no explicit commitment has been madeInterest rate cut, his statements already indicateInterest rate cuta tendency, advocating for a dual-track approach of "Balance sheet reductionandInterest rate cut"Dual-track parallel operation;"CICCPointed out,Kevin WarshStatements at the interest rate level have already shownInterest rate cuta tendency;US President Trumphas repeatedly expressed hope that the new Federal Reserve ChairInterest rate cut。
Historical reference: Federal Reserve Chair transition and policy continuity
Historically, a change in leadership at the Federal Reserve has often been accompanied by adjustments in policy style, but the core objectives of monetary policy—price stability and full employment—have remained unchanged. In 2018,Powellwhen taking over from Yellen, there were similar market concerns about policy continuity, but the Federal Reserve ultimately maintained a gradualInterest rate hikepath. This time,Kevin Warshif successfully appointed, his dual-track approach of "Balance sheet reductionandInterest rate cut" will face challengesInflationDual challenges of pressure and slowing economic growth.
Notably,Kevin WarshInHearingemphasized that the Fed needs a 'new'Inflationframework,' hinting at a potential adjustment to the existing2% inflationtarget regime. We will closely monitor the outcome of theApril 30 FOMCmeeting and subsequent developments, including theWarsh nominationConfirm progress.
Other major central bank activities
The People's Bank of China (PBOC):On April 27, the People's Bank of Chinawill carry outa 400 billion yuan MLFOperation, with a one-year term.the People's Bank of China, the State Administration of Foreign Exchange held a warning and education meeting for the entire system, emphasizing the continuous rectification of 'involutionary' competition in financial institutions. In addition,the People's Bank of Chinaand seven other departments issued the 'Measures for the Administration of Online Marketing of Financial Products,' which will be implemented starting September 30, 2026.
ECB:investigationshows that geopolitical tensions have driven upInflationDue to concerns over the impact, the European Central Bank (ECB) is highly likely to raise interest rates in Juneby 25 basis points, while April will see no action. To counteract downward economic pressures, institutions generally predict that the ECB will initiate a Interest rate cutcycle in 2027, with deposit rates expected to return to 2%levels. The money market has fully priced in two rate hikes by the ECB before December Interest rate hike, and the probability of a third policy tightening has reached 50%.ECB Governing Council member Kocher stated that due to the uncertainty surrounding the Iran war, he is currently unable to forecast the outcome of the bank's April 29rate decision meeting extending to the 30th.ECB Governing Council member KazaksIt indicates 'no rush to'Interest rate hike, current data is not yet sufficient to support taking this action.ECB President Christine LagardeThe economic outlook remains highly uncertain.
Bank of Japan: Due to the impact of the Middle East conflict,Bank of AmericaEconomists and strategists are revising their forecasts forBank of Japanthe nextInterest rate hiketiming, with expectations now that the bank will tighten monetary policy in June rather than April.Mitsubishi UFJalso adjustedthe Bank of Japan's interest rate hikeThe expected timeline has been postponed from April to June.Bank of Japan SurveyIt shows that Japanese households' long-termInflationA modest increase is expected, reaching the highest level in at least two decades over the next five years.InflationThe expected mean rate from the last timeinvestigationslightly increased to 9.8%10.3%。Bank of JapanIt stated that the Bank of Japan has a robust capital base and stable funding sources, sufficient to withstand various stress scenarios.
Bank of England: According to the overnight index swap (OIS) curve, investors have pricedBank of EnglandIn 2026, it willInterest rate hikeNear60 basis points。
Market reaction: Rising oil prices, pressure on risk assets
Last week, the global market was dominated by 'energy crisis concerns' — a significant rise in oil prices,InflationExpectations heating up, central bank policy paths face adjustment pressures.
In the crude oil market, $Crude Oil Futures (JUL6) (CLmain.US)$ Weekly increase reached+12.95%, close94.88USD; $Brent Last Day Financial Futures Current Contract (JUL6) (BZcurrent.US)$ Weekly increase reached+15.25%, close105.52Dollars, both rebounding sharply. The surge in oil prices was mainly driven by continued tensions in the Middle East's geopolitical situation, with market concerns over the risk of supply disruptions in the Strait of Hormuz escalating rapidly.
In the interest rate market, according to CME FedWatch data, market expectations for the Federal ReserveApril 30Probability of maintaining interest rates unchanged is as high as100.0%, indicating the market is confident that the Fed will remain on hold at the next meeting. However, the surge in oil prices has broughtInflationpressures that could affect subsequent policy paths; we will closely monitorInflationdata and statements from Fed officials.
Particularly noteworthy is that, at 27th local time early morning, Iran has conveyed a three-phase (completely ending the war → managing the Strait of Hormuz → nuclear issue) negotiation plan to the US through intermediaries, stating it will not participate in nuclear issue negotiations until agreements are reached in the first two phases. If the US accepts the proposal, negotiations can resume, which would lead to a correction in last week’s soaring oil prices.
Market Sentiment Snapshot
Investors are currently in a state of entwined expectations of a 'policy turning point' and 'Inflationpressure concerns.' On one hand,Warsh's hearingdemonstrated aInterest rate cuttendency that has led the market to anticipate future monetary easing policies; on the other hand, the pressure from surging oil prices may constrain the Fed’s room for easing. The market is caught between expectations of a policy shift andInflationinflation pressures.InflationBetween reality, volatility is expected to remain high.
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
Comment (1)
to post a comment
2
1