At 2:00 AM, an era quietly came to an end.

Source: Wall Street Intelligence Circle

The World Remembers Walsh

At 2:00 AM in the UTC+8 time zone, the Federal Reserve announced interest rates would remain unchanged, but nonetheless shocked the world.

The dot plot hinted at a possible rate hike before the end of this year, and the policy statement removed the previous phrasing that “suggested a potential rate cut.” As a result, US stocks, gold, and bitcoin fell sharply, while the US dollar index surged.

But for professionals on Wall Street, the above was predictable; the real shock came in the following three points:

First, Walsh undertook drastic cuts to the policy statement, reducing it to just three paragraphs—less than half the word count—returning to the format used in the Greenspan era. The first time opening the Fed news release, people thought they had clicked the wrong link. Now, except for a factual summary of the economic situation, the statement offers almost no guidance.

This marks the beginning of the new Fed Chair Walsh’s changes—he did not first change the market, but started by changing the Fed itself, with the goal of ultimately shifting the market. Walsh announced a new era: the era of Powell’s “transparent Fed” has ended, and the era of Walsh’s “opaque Fed” has begun. In the future, market volatility is likely to rise significantly. Investors can no longer, as in past years, predict the direction in advance by scrutinizing every word from the Fed.

During Powell’s era, markets loved analyzing the Fed’s every statement—a single sentence could be dissected for three days, a punctuation mark could be debated for a week. But Walsh won’t do this anymore; the market must now interpret on its own, discover prices independently, and bear risks itself. In fact, this is a major revolution in monetary policy.

Second, the “dot plot” released by the Fed was missing one dot. On the dot plot, each official is represented by a “dot,” and this time, the missing one was likely Walsh himself (who refused to submit an economic forecast).

The dot plot was introduced in 2012 during Bernanke’s tenure as a product of “transparency.” Before joining the Fed, Walsh criticized the dot plot in public essays and academic discussions, calling it “misleading to markets and making policy rigid.” In his debut, Walsh chose the most extreme and resolute method, not submitting his forecast, to challenge a 14-year Fed tradition. Since the Chair himself is not participating in this game, the authority of the other 18 officials’ forecasts will likely disappear in the future. The absence of this “dot” suggests that the Fed may gradually abandon the release of the dot plot.

Third, Walsh did not deliver a “loyalty pledge” to Trump, but instead gave it to the Federal Reserve (this meeting had zero dissenting votes). Walsh’s remarks were seen by Wall Street as “slightly hawkish,” resulting in market developments that were contrary to Trump’s wishes—US stocks fell across the board, and the 10-year US Treasury yield approached 4.5% again.

Powell turned the Fed into a press office, while Walsh is turning it back into a true central bank.

One thing worth noting is the dramatic three hours for gold after the decision: in the first hour, it plunged, losing $100 (UTC+8); in the second hour, it fell another $50 (UTC+8) on inertia; and in the final session, short sellers closed positions, causing a small rebound of $20 (UTC+8). This vividly showed the market’s fear and greed.