2026 is very likely to be a turning point for central bank policies. The simple logic of either continuing rate cuts or resuming rate hikes in one direction is no longer valid. Instead, interest rate tools and balance sheet tools will start to divide their roles: - Interest rate tools will handle macro narratives - Liquidity tools will save the market This recent rate cut is a clear example: a 25bp cut followed by an announcement of insufficient reserves, then initiating short-duration Treasury purchases to address reserve issues. On top of that, the FOMC's internal consensus is actually heavily divided. Two hawkish members voted against the rate cut, while others felt the rate cut was too mild. This could lead to two scenarios: - The rate-cutting cycle suddenly pauses, and the stance turns hawkish - When the market expects tightening to return, liquidity tools are suddenly activated to inject funds again Additionally, outside of the U.S., most central banks are likely to lean hawkish in 2026. The European Central Bank has already started evaluating rate hikes by the end of 2026, meaning next year is unlikely to be a year of easing. Therefore, 2026 will definitely be a battle between liquidity tools and interest rates. At least for now, it seems like there won’t be much deviation from this.