Recently, the direction from the Fed has been a bit subtle. A statement from San Francisco Fed President Daly has pushed market speculation about the December policy to new heights.

What did she say? The rate cut last week, in her view, was just a "insurance" for the labor market — in plain terms, the Fed's biggest concern right now is not about controlling inflation, but rather that employment data might suddenly collapse. As for whether to do it again next month? Her answer was very diplomatic: "Keep an open mind." This kind of ambiguous statement instead reveals that there is still intense competition within.

What is even more worth noting is her harsh words: "If in order to bring inflation back to 2%, we lose millions of jobs, that would definitely be the disaster we least want to see." This attitude is very clear - the Fed's balance is obviously tilting towards employment now. But on the other hand, she also didn't dare to downplay the inflation issue, after all, the numbers are there, "still too high."

So the current situation is: on one hand, we need to protect employment from collapsing, and on the other hand, we have to guard against inflation rebounding. The "balancing risks" decision that Daly mentions sounds easy to say, but it's incredibly difficult to implement. If there is even a slight disturbance in the labor market, the expectation for interest rate cuts will heat up; if inflation data climbs again, the hawks will jump out to sing a different tune.

The meeting in December is likely to be a heated one. The market is not only focused on whether there will be a rate cut, but more importantly - which bomb they are more afraid of detonating first. This uncertainty is not good news for risk assets. The employment and CPI data in the coming weeks are expected to directly determine how this grand finale will play out at the end of the year.