While the world is hoping the Fed will 'inject liquidity to save the market', Powell has pressed the interest rate pause button three times in a row. This seemingly 'counter-cyclical' action actually hides five risky moves— the Fed is using a no-rate-cut strategy to lay a 'thorny safety net' for the US economy.

The first trump card: Snuffing out the last flicker of inflation resurgence

❶ Prevent the 'ghost of inflation' from awakening again

  • Core data contradicts market expectations: The March core PCE is still above the target of 2%, service sector prices are like untamed wild horses, and wage growth of 6% is pushing up labor costs

  • Tariff policy adds fuel to the fire: The newly introduced 10% import tariff directly hits consumers with the reconstruction costs of the supply chain, and lowering interest rates is like handing a torch to inflation.

❷ Breaking the 'wage-price' spiral trap

What the Fed fears most: Supermarket clerks demanding wage increases → Bread prices rise → More people demanding wage increases in a vicious cycle. Maintaining a 5.5% interest rate is a warning to the market: Don't expect the central bank to indulge inflation expectations.

The second trump card: Protecting dollar hegemony with 'policy purity'

❶ Refuse to be a 'political ATM'

The Biden administration urges interest rate cuts to stimulate the election economy every day, but the Fed prefers to be the 'bad guy': Minutes from 11 meetings in 2024 show that 70% of committee members believe 'political pressure is the main risk', preserving the facade of an independent central bank is more important than short-term appeasement of the government.

❷ The last moat of the dollar

When the proportion of cross-border payments in RMB exceeds 30%, the Fed knows better than anyone: once interest rates are lowered, it will be accused of 'bending to the government'. Saudi Arabia may accelerate the sale of US Treasury bonds, and global foreign exchange reserves will be reshuffled. Maintaining interest rates is like insuring the credit of the dollar.

The third trump card: Walking a tightrope in a 'fire and ice' situation

❶ Breaking the economic 'split personality'

Consumer data is still holding up (retail growth 2.3%), but manufacturing PMI has dropped to 46.3 below the line of growth and decline, with the job market showing a strange combination of 'wage increases, fewer jobs'. Not lowering interest rates means waiting for more data to unveil the true state of the economy, avoiding becoming a 'data gambler'.

❷ Tightening the spell on stagflation

GDP growth expectation cut from 2.1% to 1.3%, while inflation forecasts raised by 0.5%— the Fed acknowledges entering the 'stagflation corridor'. Lowering interest rates at this time would be like stepping on the gas and brakes simultaneously; it's better to stabilize inflation first and then slowly treat the illness of growth.

The fourth trump card: A scalpel to deflate financial bubbles

❶ Popping the 'zero interest rate dependency syndrome'

Stock market PE returns to the 25 times bubble range, housing market rental yield falls to 2.8%, lower than deposit rates. Maintaining high interest rates forces Wall Street gamblers to retreat: Don’t expect the central bank to absorb the bubbles, they should focus on performance.

❷ Stabilizing US Treasuries, the 'financial lifeline'

The scale of US debt has exceeded 35 trillion, with the 10-year yield hitting 5%. Slowing the balance sheet reduction + not lowering interest rates is equivalent to oxygenating the treasury market: preventing the yield curve from inverting further and avoiding a repeat of the 2023 banking disaster.

The fifth trump card: Keeping bullets to lower interest rates for a big battle

❶ Stockpiling 'rescue money' for economic recession

Historical lessons are bloody: The 2008 rate cuts were too quick, forced into zero rates in 2020, and now the Fed has learned its lesson— keeping 5.5% interest rate space for a potential spike in unemployment above 5%, leaving 10 opportunities for rate cuts, unlike the European Central Bank which has run out of ammunition.

❷ Waiting for the dust to settle on the tariff storm

By 2025, 30% of the effects of tariffs on China have not fully manifested, and the global supply chain is experiencing a 'second earthquake'. Not lowering interest rates means waiting for this tariff tsunami to pass, avoiding policy overlap that could smash the economy against the beach.

The fatal weakness of this gamble

❶ Companies are being strangled by high interest rates

The default rate on junk bonds rose to 3.2%, small and medium-sized enterprises’ loan costs broke 8%, and investment growth rate fell to 1.5%— high interest rates are draining the lifeblood of companies, with 40% of firms unable to last more than 6 months.

❷ Retail investors' wallets are unable to hold out

Credit card revolving interest rate at 19.7%, auto loan delinquency rate at a 12-year high, 30% of households tapping emergency savings— the consumption engine could stall at any moment.

The Fed's ultimate calculation

Powell's calculations are clear:

  • Short-term: Use inflation to hold on for half a year, exchange for US dollar hegemony in the next ten years

  • Medium-term: Let financial bubbles naturally clear, avoid hard landing

  • Long-term: Maintain the credit bottom line of the 'global lender of last resort'


This gamble of not lowering interest rates is essentially exchanging short-term pain for the Fed's 'policy dignity'. But the price is that the global economy must play a 'test of endurance' with the US— whoever cannot hold on first will become a sacrifice of the high interest rate era.

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