The Fed only reduced the size of its bond purchases, but did not stop buying bonds. The reduced purchase size is still relatively large. Debt reduction has limited impact on the commodity market in the short term and will not cause too much fluctuation in commodity prices. Moreover, because the market fully anticipated the actions of the Federal Reserve, commodity prices have been reflected in the early stage, and the subsequent impact is basically negligible.

At the same time, if the Fed does not raise interest rates, it will not have a significant impact on the commodity market, and it will not change the running trend of crude oil, gold and other commodities in the short term.

The Federal Reserve has a certain negative impact on the commodity market. The current surge in commodity prices is driven by excessive liquidity, and the Fed's reduction policy is not good for commodities.

Extended data

1. What is debt reduction?

Debt reduction refers to the Taper policy of the United States, which refers to the actions of the Federal Reserve to reduce the scale of debt purchases and the balance sheet of the Federal Reserve. Contrary to quantitative money (QE), Taper is an important part of the Fed's monetary policy after the economic crisis, aiming at reducing the Fed's balance sheet.

The contraction of the Fed's balance sheet means that the size of the balance sheet is reduced. Specifically, the overall scale of the balance sheet will be reduced by excluding the bond assets at the asset end from the balance sheet and recovering the US dollars at the debt end to offset the "loan" generated by the previous issuance of paper money.

2. "Debt reduction" measures

Debt reduction can be divided into passive debt reduction and active debt reduction. The former means that the Fed will redeem the bonds it bought earlier and stop reinvesting in the market. The latter refers to the sale of unexpired bonds by the Federal Reserve to other investors. Whether active or passive, the purpose is to recover market funds, stop market circulation and reduce the monetary base. To sum up, the feasible measures to reduce the balance sheet include: 1, selling existing assets, 2, stopping the reinvestment of maturing bonds, and 3, shortening the asset holding cycle by "buying short and selling long".