I. Major Fed Updates

1. The Fed officially enters the Kevin Warsh Era (Latest: May 18)

    

   On May 13, the Senate confirmed Kevin Warsh as the 17th Fed Chair by a vote of 54-45, with a 4-year term. He also secured a 14-year tenure as a Fed Governor.

    

   Powell’s term ended on May 15, and he will serve as interim chair until Warsh takes office in early July.

    

   Power layout: Hawkish Warsh will work alongside Powell, who remains a governor until 2028 to balance policies. Dovish Governor Milan will resign once Warsh assumes office.
    
2. Latest Monetary Policy Stance (Minutes & Official Remarks, May 18)

    

   The benchmark interest rate stays unchanged at 3.50%-3.75%. The April FOMC meeting saw an 8-4 split vote, the most divided stance in 30 years.

    

   John Williams, President of the New York Fed: Current policies are moderately tight but appropriate. No rate hikes or cuts are needed. Inflation remains elevated while employment does not drive inflationary pressure.

    

   Market consensus: Odds of rate cuts in 2026 stand at roughly 1%, and rate hikes at around 20%. The earliest expected rate cut has been pushed back to September.
    
3. Core Policy Directions under Warsh (Wall Street Outlook)

    

   ✅ Accelerate balance sheet reduction to shrink the current $7.5 trillion asset scale and tighten market liquidity.

    

   ✅ Refocus policies solely on price stability and lender-of-last-resort duties, scaling down climate and inclusive economy-related agendas.

    

   ✅ Revise inflation gauges, downplaying core PCE while prioritizing nominal GDP and wage growth data.

    

   ✅ Boost productivity via AI to curb long-term inflation and create conditions for future rate cuts.
    

II. Surging U.S. Inflation Rules Out 2026 Rate Cuts (Data Released May 12)

III. Market Reactions (May 18)

• U.S. Dollar Index strengthened, nearing 106
• Gold prices plunged below $4500 per ounce, hitting a fresh four-month low
• 10-year U.S. Treasury yield hovers near 4.8% at a high level
• U.S. equities: Growth stocks under pressure, value stocks remain resilient