Powell 'in the hot seat'? The real driving force behind market turmoil is...

Recently, the market has experienced significant fluctuations, with risk markets declining, and many have pointed fingers at Powell and the Federal Reserve's monetary policy, but is that really the case?

Last Thursday morning's FOMC interest rate decision, which lowered rates by 25 basis points as expected, showed internal disagreement in the dot plot, and the median target interest rate for 2025 was raised, while rate cut expectations were lowered. Powell's comments during the press conference were deemed hawkish; however, his concerns about inflation stem more from the uncertainties of Trump's policies rather than changes in macro indicators, and he also has confidence in the economic outlook.

From a macro data perspective, the US PCE index has not risen significantly, the unemployment rate is stable, non-farm payroll data is increasing, and GDP growth is steady, with no data supporting a resurgence of inflation or an economic recession, indicating that Powell's concerns are justified. The main reason for the Dow Jones index's consecutive declines is the sharp drop in the weight of UnitedHealth Group, resulting from its CEO's assault incident, and not systemic risk.

Regarding the Bitcoin reserve issue, Powell's stance is unimportant; the decision-making power lies with Congress. The main reason for the market's violent reaction is Trump's pressure on Congress regarding the short-term spending bill, even threatening to eliminate the debt ceiling rule, which triggered risk-averse sentiment among investors.

The US debt ceiling is the legal borrowing limit for the government, which has been suspended multiple times to respond to crises, but now the US public debt to GDP ratio has reached a historical high. If Trump abolishes the debt ceiling, it will impact the US dollar's credit system, with the aim of overcoming the short-term debt crisis and implementing tax cuts and other policies. This move undermines the narrative that 'the US will rely on Bitcoin reserves to solve the debt crisis', triggering profit-taking and risk aversion. Therefore, current observations of Trump's team's policies are crucial, as their influence far exceeds other factors, and the market's direction may largely depend on this.