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Institution says Fed's hawkish turn is politically driven, this rate hike cycle will be 'short and shallow'
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An article from cfi_forex, citing institutional research reports, argues that the Federal Reserve's recent hawkish policy shift is driven more by political cycles than economic fundamentals. It notes that Kevin Warsh's policy stance tends to be hawkish under Democratic administrations and dovish under Republican ones, with the current hawkishness seen as an overcorrection to restore Fed credibility. The article points to August US non-farm payrolls adding 162,000 jobs, partly due to a seasonal adjustment anomaly, and core CPI at 0.2% month-on-month, with a single mobile phone plan component contributing 10 basis points. It suggests the US economy shows K-shaped divergence, with consumer and housing investment slowing, and AI equipment investment insufficient to support a full tightening cycle. The research predicts a 'short and shallow' rate hike cycle with limited global asset suppression, and recommends adding to positions in US and Chinese tech stocks during pullbacks, while maintaining gold as a clear overweight position.
Source report
Date: September 24, 2026 09:41:34 Source: CFi.CN
Data shows that the U.S. added 162,000 non-farm payroll jobs in August, but the increase was largely driven by an anomaly in seasonal adjustment—the effect of the 4-week/5-week survey interval contributed over 8,000 jobs. Excluding this factor, actual growth remained steady.
Core CPI rose 0.2% month-over-month, with a single component—mobile phone plans—contributing 10 basis points. Excluding this item, core inflation remains near the 12-month median of 20 basis points. Headline inflation may see a temporary rebound in Q4 year-over-year, driven by base effects and oil prices, rather than a trend reversal.
Recent institutional research notes indicate that the shift in policy stance by [Warsh] reflects political cycles more than economic cycles: a hawkish tilt during Democratic administrations and a dovish stance under Republican ones. The current hawkishness is seen as an "overcorrection" aimed at restoring the Fed’s credibility. The reports suggest that the policy reaction function has already built in room for adjustment, and five special task forces may lead to a future reassessment of AI and the inflation framework.
The research also highlights a clear K-shaped divergence in the U.S. economy, with consumer spending and residential investment slowing. While AI-related equipment investment remains strong, it is insufficient to support broad-based rate hikes. The fundamental backdrop does not support a "long-cycle" tightening. The reports conclude that the current rate hike cycle will be "short and shallow," with limited suppression of global assets. In historically similar cycles, the S&P 500, copper, and gold have mostly risen.
As a result, the pullback in U.S. and Chinese tech stocks offers opportunities for increased allocation. Gold’s medium-term logic remains intact and continues to be a clear overweight direction.
Source
中财网-外汇Regional
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Fed hawkish shift politically driven, research says; tech stocks and gold seen as buying opportunity