The current market is experiencing turbulence due to the repeated policies of the Trump administration, and investors are urgently concerned about how the Federal Reserve will respond to potential crises. From tariff fluctuations to stock market volatility, the uncertainty of the White House is testing the wisdom of the Federal Reserve in maintaining market stability, and historical experience shows that this world's most important central bank holds a series of "rescue trump cards" in its hands.

The history toolbox is waiting to be restarted

The recent market volatility is reminiscent of the early stages of the pandemic, when the Federal Reserve turned the tide with zero interest rate policies, trillions of bond purchases, and industry support programs. Analysts point out that these tools can still be activated at any time and have been strengthened through new mechanisms. Patricia Zobel, the head of macro research at Guggenheim Investments, emphasized that automatic stabilizers, including the permanent repurchase facility (launched in 2021) and emergency loans at the discount window, have become the first line of defense against liquidity crises.

Cautious intervention attitude

Despite having comprehensive tools, Federal Reserve Chairman Powell has recently made it clear that he is not in a hurry to intervene in stock market volatility. He believes that although the current market is impacted by policy uncertainty, trading is still "orderly". Behind this restrained attitude is caution that policy tools may be misunderstood as monetary stimulus - for example, restarting bond purchases could stabilize the market or be interpreted as a shift in monetary policy.

The ultimate weapon in controversy

Former Federal Reserve Governor Stan and other experts pointed out that asset purchases should be the "last line of defense". Academics suggest that the Bank of England should refer to its experience in dealing with the "Truss shock" in 2022 and establish a temporary "buy sell" mechanism to separate market stability from conventional stimulus. However, before that, automated tools such as the permanent repurchase facility may take the lead - although this mechanism has only been used once, it is considered a key design for preventing liquidity crises.

summarize

Faced with market turbulence caused by political factors, the Federal Reserve is walking on a tightrope of policy intervention. From ready to use automatic stabilizers to controversial bond purchases, its toolbox contains both short-term response measures and long-term policy considerations. As Powell said, as long as the market mechanism operates normally, the Federal Reserve is more willing to be a calm observer; But if the crisis recurs, this central bank that once rewrote financial history is already prepared with a complete set of response plans from routine to unconventional.