The Fed's reduction in bond purchase (taper) finally landed. The Federal Reserve recently announced that it would reduce the scale of asset purchases by US $15 billion month by month from November. At this rate, the debt purchase plan will be completely completed by June next year. What will be the impact of the Fed's reduction in bond purchases? How should China respond? This is a topic of general concern to people in economic circles. Limited direct impact on the market "The launch of taper has a relatively limited direct impact on the market," Cheng Shi, chief economist of ICBC international, told the economic daily. Taper refers to the process by which the Fed gets rid of the constraints of inflation by reducing bond purchases over a long period of time. At the same time, by slowing down the reduction rate, we can cushion the market and avoid sharp fluctuations. Cheng Shi believes that the limited impact is mainly because the market's expectation of taper has been reflected in price fluctuations in advance and has been gradually digested by the market. In view of the "downsizing panic" triggered in 2013, the Fed strengthened its communication with the market. In July this year, the Federal Reserve made it clear that it was considering the adjustment of the scale of bond purchase, and then the market generally expected the Federal Reserve to announce the taper timetable within the year. In September, the Federal Reserve made it more clear to "draw a clear line" between taper and interest rate hike, so as to avoid the panic of interest rate hike in the market, which led to sharp fluctuations in the market. After the landing of taper, the three major indexes of U.S. stocks jumped and hit a record high. The yield of 10-year U.S. bonds once returned to the 1.6% level. The dollar index, which was close to the high level in more than two weeks, plunged and quickly fell through the 94 level. Although the impact on the domestic financial market is not obvious in the short term, according to industry experts, taper's impact may gradually emerge in the future. Dong Chengxi, a researcher at Zhixin Investment Research Institute, said that the spillover impact of the Fed's reduction in the scale of bond purchase may still have a certain impact on domestic financial markets and enterprises through intermediaries such as changes in risk-free interest rates, changes in the US dollar exchange rate and fluctuations in international commodity prices. On the one hand, after the landing of taper, the market will focus on raising interest rates, and the uncertainty of the prospect of raising interest rates may lead to increased volatility of US dollar assets, increased risk aversion of international capital, withdrawal of capital from emerging markets and seeking risk aversion assets, and RMB assets may become its "safe harbor"; On the other hand, after the landing of taper, if the Fed's prediction is accurate, with the repair of the global supply chain, inflation will fall, the rise in the prices of global priced commodities such as energy may be gentle, reduce the upward pressure on domestic PPI and slow down the pace of price rise of raw materials, which will be conducive to corporate profits. Unconventional policy exit into the general direction At present, when the Fed will raise interest rates has become the focus of the market. The implied interest rate increase probability derived from the federal funds rate of the Federal Reserve shows that the probability of the market betting that the Federal Reserve will raise interest rates at least twice next year is more than 70%. Zhang Yu, chief Macro Analyst of Huachuang securities, believes that the higher expectation of raising interest rates does not mean that interest rates will be raised. When the Federal Reserve will provide forward-looking guidance on raising interest rates and how the expectation of raising interest rates evolves depends more on the game between the interest rate increase "thought by the market" and the interest rate increase "thought by the Federal Reserve". Cheng Shi believes that the Fed's reduction in the scale of bond purchase means that global monetary policy will pay more attention to long-term price stability, and the withdrawal of unconventional policies is a deterministic direction. In order to ease inflationary pressure and hedge the marginal tightening of the Fed's monetary policy, many central banks, including those of emerging economies, chose to adjust monetary policy and tighten monetary policy during the year. The Central Bank of Russia and the Central Bank of Brazil have raised interest rates six times. On August 26, the Bank of Korea raised interest rates for the first time after the epidemic, raising the benchmark interest rate to 0.75%. On October 6, the Central Bank of New Zealand raised interest rates for the first time in seven years. On October 27, the Bank of Canada announced the end of the bond purchase plan and the pace of interest rate increase may be accelerated. China's monetary policy emphasizes more independence Under the background of global monetary policy shift, what is the trend of China's monetary policy? "China's monetary policy will not follow the Fed's marginal tightening." Dong Chengxi believes that China and the United States have different stages of economic development and need different monetary policies to cooperate. Since the outbreak, China's economy has recovered ahead of the United States and is also ahead of the United States in the economic cycle. At present, China's economy has passed the stage of rapid economic recovery after the outbreak and is facing considerable downward pressure. It needs to be coordinated with flexible and stable monetary policy to boost the confidence of market players. With sufficient foreign exchange reserves and current account surplus, China has the ability to cope with the spillover effect of the Federal Reserve taper and adhere to the "I-oriented" monetary policy. The starting point will always be the development needs of the domestic economy. Wen bin, chief researcher of China Minsheng Bank, believes that China's monetary policy should be more forward-looking and prepared while maintaining independence and adhering to "focusing on me". It is expected that the central bank will use a combination of various monetary policy tools to match the number of "reverse repurchase + MLF", maintain reasonable and abundant market liquidity, encourage and guide financial institutions to increase their support for the real economy through structural monetary policy tools, and maintain a safe and stable monetary and financial environment. With regard to the changes in the international economic and financial market environment, sun Guofeng, director of the Monetary Policy Department of the people's Bank of China, said that since this year, the people's Bank of China has made forward-looking policy arrangements to reduce the possible spillover impact caused by the policy adjustment of the central banks of developed economies such as the Federal Reserve. In the next stage, the prudent monetary policy will be flexible, accurate, reasonable and appropriate. We will focus on ourselves, take stability as the first word, make cross cycle adjustment, and comprehensively consider the policy convergence between this year and next. At the same time, we should comprehensively use a variety of monetary policy tools to maintain reasonable and sufficient liquidity and enhance the stability of the growth of total credit. (outlook new era)