Summary of the Federal Reserve's Speech Last Night

The Federal Reserve has held steady for the third consecutive time, emphasizing that the uncertainty regarding the outlook has further intensified, with rising unemployment and increased risks of inflation. The S&P 500 index briefly dipped but ultimately closed up 0.43%.

As expected by the market, Powell continued to stress that the current economic environment is filled with uncertainties during the press conference, insisting that the Federal Reserve needs to remain patient (he mentioned 'Wait and see' 11 times). In the context of the ongoing divergence between soft and hard data, he prefers to rely on the latter and pointed out that current hard data still reflects a robust performance of the U.S. economy (tariffs boosting imports will make GDP data difficult to interpret accurately, while consumer spending and inventory may be revised upwards).

When asked about whether to prioritize employment or inflation, Powell reiterated that it is still too early to draw conclusions, but there may have to be a trade-off.

Regarding Trump's repeated calls for interest rate cuts, Powell responded that “we cannot act preemptively” and emphasized that Trump's demands will not influence the Federal Reserve's work. As for the fact that the two have not met since Trump's second term, Powell stated that he would not request a meeting, and it should be proposed by Trump.

According to CME's 'Fed Watch': The probability of the Federal Reserve maintaining interest rates in June is 80.2%, the probability of a 25 basis point cut is 19.8%, and the probability of a 50 basis point cut is 0%. The probability of the Federal Reserve maintaining interest rates in July is 28%, the cumulative probability of a 25 basis point cut is 59.1%, the cumulative probability of a 50 basis point cut is 12.9%, and the cumulative probability of a 75 basis point cut is 0%.