Policy Adjustments After the FOMC Meeting and the Impact of Reciprocal Tariffs

This week, the financial markets performed steadily overall, with slight fluctuations across various assets. U.S. stocks rose slightly, with the Dow Jones Index seeing a significant increase. In the commodity market, gold and copper prices continued to rise, while oil prices remained stable and natural gas prices fell. The cryptocurrency market was sluggish, with Bitcoin fluctuating around $84,000.

After the FOMC meeting, the Federal Reserve made adjustments at both the strategic and tactical levels:

1. Maintain a wait-and-see approach strategically, adhere to the "data-dependent" principle, and do not commit to a specific timeline for interest rate cuts.

2. Make three key tactical adjustments:

   • Emphasize the New York Fed's 5-year inflation expectations data, downplay the University of Michigan Consumer Sentiment Index.
   • Reiterate the concept of "temporary inflation" to pave the way for interest rate cuts
   • Adjust the pace of balance sheet reduction to hedge liquidity risk

These adjustments aim to balance market expectations and economic fundamentals, addressing the impact of Trump’s policies and the risk of stagflation.

In terms of liquidity, the broad liquidity has risen to 6.1 trillion, and the usage of the Federal Reserve's discount window has decreased, indicating alleviated funding pressure. The interest rate market expects a 67% probability of a first rate cut in June, with an anticipated total of three rate cuts for the year. The bond yield curve has steepened, reflecting increased market certainty regarding the rate cut path, but concerns about inflation rebound still exist.

Next week, the market focus will be on the "reciprocal tariffs" that take effect on April 2. Key points of attention include:

1. Tariff intensity: The tax rate and coverage will affect product prices, inflation, and corporate profits.

2. Possible retaliatory measures from other countries: may exacerbate global trade tensions, affecting supply chains and economic growth.

The market remains in a cautious state, with investors tending to reduce risk exposure and increase holdings in safe-haven assets. The impact of tariff policies on the Federal Reserve's stance is also worthy of attention. If inflation is pushed higher, it may prompt the Federal Reserve to tighten policies earlier; if inflation is controllable, the Federal Reserve may maintain a dovish position.

The current market still has uncertainties regarding policy and risk pricing. It is recommended to adopt a "defensive + flexible offensive" strategy, avoiding tail risks while seizing phase opportunities.