Source: Jin10 Data
Powell said that inflation has made "significant progress", but he remains cautious about the timing of the first rate cut...
At 21:30 Beijing time, Federal Reserve Chairman Powell, European Central Bank President Lagarde, and Brazilian Central Bank Governor Neto delivered speeches at the Central Bank Forum held by the European Central Bank.
Powell said: "The labor market is still strong, and we continue to maintain steady growth."
Regarding inflation, Powell stated that the downward trend in inflation shows signs of recovery. "We have made considerable progress on inflation, and we are returning to the downward inflation path." However, he pointed out, "We need more confidence before lowering policy rates and need to see more data like what we have recently seen. The data shows that we have made significant progress. If the labor market unexpectedly weakens, this will also cause us to react. We have the ability to take it slow and make the right decisions."
Powell said that it is usually more difficult to reduce inflation in the service sector, and some inflation in the service sector is catch-up inflation. Inflation may return to 2% by the end of next year or the year after. He added that one risk of inflation is that we act too fast, and another risk is that we wait too long and the labor market softens.
Regarding market doubts about whether current monetary policy is restrictive, Powell stated: "Our policy is still restrictive and appropriate. Tightening policies are closely related to supply."
Concerns about the independence of the Federal Reserve in the recent market involve the decision to cut interest rates for the first time and the potential for Trump's second term or "reform" of the Fed. Powell said, "We have been told not to engage in politics, and we will not do so. In the United States, the independent Fed has very broad support. Both parties in Congress support the independent Fed."
As Powell commented on the economy, US Treasury yields fell further, the US dollar index fell short-term by nearly 10 points, spot gold rose short-term by nearly 5 US dollars, but after the job vacancy data was released, it gave back some of the gains.
Concerns about the independence of the Federal Reserve in the recent market involve the decision to cut interest rates for the first time and the potential for Trump's second term or "reform" of the Fed. Powell said, "We have been told not to engage in politics, and we will not do so. In the United States, the independent Fed has very broad support. Both parties in Congress support the independent Fed."
Speaking of the U.S. government's deficit problem, Powell said: "Our budget deficit is very large, and the deficit path is unsustainable. The deficit problem needs to be solved sooner rather than later. Fiscal policy is the job of elected officials, and the Federal Reserve will not comment on anyone's fiscal policy."
Analyst Ye Xie said that Powell remains tight-lipped on whether there will be a rate cut in September. "Powell sidestepped the question of whether the Fed will begin cutting interest rates in September. He adheres to the consistent view that monetary policy has two-way risks. Cutting interest rates too early could rekindle inflationary pressures, while cutting them too late could unnecessarily harm the Fed's economy. It is expected that there is a 70% chance of a rate cut in September."
Analyst Steve Matthews pointed out that Powell's ambiguous attitude is not surprising. "The message conveyed by Powell today seems to be that considering the strong labor market, the Fed can cut interest rates 'slowly', and he does not detail the timing of the rate cut. After all, there will be a lot of data before the July and September meetings, so today's attitude is not surprising.
According to analysis reports from Informa Global Markets, in the past few months, Fed Chairman Powell has been noticeably more dovish than most FOMC members, which was confirmed again in his speech at the ECB forum.
Editor / jayden