The Fed dominates, but it doesn't act alone. Understanding how major central banks interact — and sometimes offset each other — is crucial for reading global liquidity.

The PBoC (People's Bank of China):

China's central bank manages the world's second-largest economy and a banking system with enormous leverage. Key characteristics:

• Often moves COUNTER-CYCLICALLY to the Fed: When US tightens (fighting inflation), China may ease (fighting deflation, supporting property)
• This 'Global Relay' can partially offset Fed tightening effects on global markets
• Watch Total Social Financing (TSF) for China's credit impulse
• The PBoC manages the yuan — a falling yuan signals they're prioritizing growth over currency stability

The ECB (European Central Bank):

Constrained by fragmentation risk — must balance inflation fighting with preventing bond spread blowouts between Germany and Italy. Key programs:

• TLTRO: Cheap loans to banks
• TPI: Can buy weaker country bonds to prevent spread blowouts
• Generally follows Fed with a lag, but can't be as aggressive due to political constraints

The BoJ (Bank of Japan):

The outlier. Near-zero rates for 30 years, balance sheet exceeding 100% of GDP, and Yield Curve (T10Y2Y) Control (YCC) that caps 10-year yields. The BoJ's policies enable the yen carry trade — arguably the largest hidden liquidity force in global markets.

The Aggregate Matters:

Global Liquidity = Fed + PBoC + ECB + BoJ + BoE + others

Markets respond to the TOTAL, not just the Fed. When the Fed is hawkish but China is aggressively easing, the net effect is less negative than Fed-only analysis suggests.