TechFlow News, April 22: A China International Capital Corporation (CICC) research report stated that Kevin Warsh, nominee for Federal Reserve Chair, testified before the Senate Banking Committee, articulating his core policy stance of pursuing balance sheet reduction and interest rate cuts in parallel. Regarding the balance sheet, he explicitly opposed institutionalizing quantitative easing (QE) and advocated for a gradual, orderly reduction of the Fed’s balance sheet size—phasing out quasi-fiscal responsibilities and refocusing the Fed on its core monetary policy mandate. On interest rates, while he refrained from making explicit commitments, his remarks signaled a clear inclination toward rate cuts.
In our view, Warsh’s policy stance represents not only a recalibration of the monetary transmission mechanism but also an extension of the “America First” strategy into the monetary domain amid the backlash against globalization—from functioning as a “global central bank” that supplies liquidity without limit to the world, to firmly controlling the overall monetary spigot, prioritizing domestic productivity, and emphasizing monetary sovereignty. We believe this shift implies a necessary revision of the narrative around persistent U.S. dollar liquidity oversupply; assets that rely solely on liquidity-driven momentum or benefit from “excessive U.S. dollar issuance” may face mounting pressure. (Jinshi)
