The Federal Reserve is in a hurry to shrink its watch, but it is not urgent for monetary policy to return to economic data.

SMM1 29: the first interest rate meeting in 2019 is just around the corner, and the focus of this meeting is not on whether the Fed will raise interest rates, because there is little suspense about the issue. From the shift in Powell's painting style in the past two months, to the decline in US economic data, the continued volatility in US stocks, and the decline in the most important inflation data, we can basically judge that there will be no interest rate hike in January.

Monetary policy should keep pace with economic development, whether hawkish or dovish, raising interest rates or not, not by Fed officials themselves. Economic data itself is the most fundamental and basic reference. The previous round of speeches by Fed officials also talked about the need for monetary policy to return more to economic data.

The Federal Reserve should be very worried about such a large balance sheet. The United States has not suffered losses. The United States has suffered a lot of losses in 2008. During the period from 2001 to 2007, the United States has been implementing low interest rates, and the benchmark interest rate has seriously deviated from the Taylor rule. It led to excess monetary liquidity, inflated the housing bubble, and then burst, spurred by higher interest rates, with the result of the financial crisis. The same is true now. The release of $4.5 trillion has boosted the US economy and inflated the stock market bubble. Now the three major stock indexes are riding a tiger, and the market expects too much of technology companies, making US stocks jittery. Confidence will not be fully restored until the balance sheet is repaired, and in the event of a market crisis, the Fed will be in trouble, unable to expand its watch or cut interest rates (there is little room).

The Fed may consider reducing the current 50 billion monthly contraction rate to give markets confidence, but real confidence should come from a complete repair of the balance sheet. The contraction is not that the Fed really wants to take money from the market, but from the point of view of the healthy development of the economy, the Fed, as the most important central bank in the world, can no longer make Greenspan's mistakes.