As for the Federal Reserve’s forecasts and expectation management, the speech delivered by Yellen of the Federal Reserve on June 27 can be used as an example for analysis.

Yellen first emphasized the continuity of austerity policies. She said that despite the uncertainty, the Fed's goal in the longer term should still be to gradually raise interest rates to a level that may still be considered very low (rate hikes), and the Fed will gradually and predictably scale back its efforts to help the domestic economy. Bond positions accumulated through the crisis (shrinkage).

In addition, Yellen also emphasized concerns about inflation. She believes that there is a strong correlation between unemployment and inflation, and low interest rates will eventually lead to rising inflation. She also expressed concerns about "high asset prices" like Vice Chairman Fisher and many other committee members.

Before the financial crisis in 2008, although "expectation management" was occasionally used, it was not in the Fed's standing toolbox. Especially during the Greenspan era, in order to avoid impact on the market, the Fed played a hide-and-seek game with the market.

You may still remember Ge Lao's famous saying: "If you think you understand the meaning of my speech accurately, then you must have misunderstood my speech."

After the crisis broke out, the Federal Reserve was forced to implement a zero interest rate policy and inject large-scale liquidity into the market through three rounds of QE. Traditional monetary policy tools were exhausted.

In desperation, Bernanke was forced to resort to expectation management after taking over, conveying economic expectations and interest rate expectations to the market through regularly held minutes of interest rate meetings, press conferences, and speeches by Federal Reserve members. and other important policy information to effectively guide market behavior and achieve monetary policy goals.

It is understandable that expectation management plays an important role in stabilizing market sentiment, reducing market volatility, and smoothly weathering crises. After Yellen took over, this tool was used to the extreme. However, the overuse of expectations management has gradually damaged the Fed's policy credibility.

Therefore, despite the Fed's constant blowing, the market currently expects that the probability of raising interest rates in September is only 16, and the probability of raising interest rates in December is only 46.

What is even more exaggerated is that the probability of the Fed raising interest rates once before the end of 2018 is expected to be no more than 40, which is completely different from the Fed's expectations. As a result, the 10-year U.S. Treasury yield has been hovering below 2.2.

At first glance, it is understandable for the market to expect this. The real GDP growth in the United States has been very weak, and the year-on-year growth rate after the crisis has been fluctuating around 2. The overall inflation pressure is not great. Although the core CPI once touched the Fed's target of 2, the core PCE that the Fed is most concerned about has never exceeded 1.8. Recently, the core PCE has not exceeded 1.8. It even dropped to 1.5.

However, the Fed thinks about the problem from a different perspective.

Although the overall economic growth data appears weak, if we look at it individually, the contribution of personal consumption expenditures and private investment representing the private sector is no worse than before the crisis; on average, the contribution of net exports is also equivalent to that before the crisis. .

The only weak aspect is government expenditure. Not only does it have no positive contribution, it drags down GDP growth by an average of about 0.5 percentage points. This is in sharp contrast to the average positive contribution of about 0.5 percentage points before the crisis. The difference is one percentage point.

Therefore, as the U.S. private sector has begun to leverage again in recent years, the economy’s own growth momentum has been significantly restored. If the public sector can maintain its pre-crisis level, real GDP can also maintain about 3 The growth rate is basically the same as before the crisis.

It can be said that the U.S. economic growth is actually much better than what appears on the surface.