Beijing time, early morning, Federal Reserve Chairman Powell's speech at the Thomas Laubach seminar was like a deep-water bomb, instantly detonating the global financial market. When the interpretation of 'abandoning the average inflation target' exploded on trading screens, short-term U.S. Treasury yields plummeted, gold surged briefly, and the cryptocurrency market was tumultuous. What truth lies behind this speech, dubbed the 'most critical monetary policy shift of 2025'? I. Powell's 'betrayal': Not abandoning the target, but changing the rules of the game. Core conclusion: From 'reckoning afterward' to 'living in the moment'. The core of Powell's speech is a significant adjustment to the Federal Reserve's monetary policy framework:
Old framework (2020-2025): Average inflation targeting (AIT), requiring inflation to 'average 2%' over a period, allowing temporarily high inflation during economic overheating to compensate for previous low periods;
New framework (expected to be implemented by mid-2025): Traditional inflation targeting (IT), focusing on 'whether current inflation meets the target', no longer tracing historical data.
A simple analogy: AIT is like a 'final exam', allowing for poor performance in regular assessments as long as the final average score is sufficient; IT is like 'pop quizzes', where every test must be passed.
II. Why is the market so volatile? Decoding four key questions
1. Abandoning average inflation = Monetary policy easing?
Yes, but with limitations. Under the AIT framework, U.S. inflation is expected to remain above 5% from 2022 to 2024. According to the rules, the Federal Reserve needs to 'repay' by subsequently lowering inflation to below 2%. After shifting to IT, this 'historical debt' is cleared, and market expectations for future interest rate hikes decrease, leading to a 25 basis point drop in short-term U.S. Treasury yields (e.g., 2-year) within an hour.
2. Did Powell violate the '2% commitment'?
Not literally violated, but the spirit has loosened. Powell repeatedly emphasized in his speech that he 'remains committed to the 2% target', but removed the key statement that 'AIT is the best tool to achieve the target'. The market interprets this as the Federal Reserve's increasing tolerance for 'short-term inflation moderately above 2%', with greater focus on employment and economic growth.
3. What does it mean for cryptocurrencies?
Short-term is favorable, long-term is questionable.
Short-term: Easing expectations drive funds towards risk assets, ETH rises 4.2% within 30 minutes after the announcement, BTC breaks $29000;
Long-term: If the IT framework leads to decreased efficiency in inflation management, the Federal Reserve may be forced to restart aggressive rate hikes, and cryptocurrencies will face greater volatility.
4. What is the real motivation behind the policy shift?
Two major pressures force reform:
Political pressure: The 2025 election is approaching, and the Biden administration pressures the Federal Reserve to prioritize the economy;
Market pressure: After the Silicon Valley Bank incident, the financial system is overly sensitive to interest rates, and the 'reckoning' under the AIT framework may trigger a debt crisis.
III. Trader's survival guide: How to respond to this 'expectation revolution'
1. U.S. Dollar and Treasuries: Is the end of negative news a positive?
Short-term strategy: Sell short-term U.S. Treasuries (e.g., 2-year), buy long-term U.S. Treasuries (e.g., 10-year), to capture the opportunity of 'steepening yield curve';
Risk warning: If May's CPI exceeds expectations, Powell may make a 'hawkish adjustment', and the dollar may rebound quickly.
2. Cryptocurrency: Riding the trend, set a stop loss
Aggressive operation: Buy ETH after breaking $2550, target $2700, stop loss at $2500;
Conservative strategy: Allocate 30% of funds to stablecoins and wait for policy uncertainty to settle.
3. Gold and commodities: A barometer of inflation expectations
Core logic: Under the IT framework, 'inflation memory disappears', the attractiveness of gold as an anti-inflation asset decreases, but if actual inflation rebounds, it may trigger safe-haven buying;
Key price level: Gold at $1950 is a watershed for bulls and bears; a breakout targets $2000, while a drop looks to $1880.
IV. Conclusion: What the Federal Reserve has taught us
Powell tells the market in a speech: Do not get lost in past inflation data, but focus on the current policy logic. This also applies to cryptocurrency investors - in this uncertain market, getting caught up in 'historical highs' or 'bottom costs' often causes you to miss opportunities. Only by closely following policy trends and flexibly adjusting strategies can you stay ahead during each 'earthquake'.
Follow me, as tomorrow I will deeply analyze the three major secrets leaked from the (Federal Reserve policy framework revision draft), guiding you to prepare in advance for the next round of market changes. Remember: In the crypto space, what can kill you is never volatility, but the stubbornness of seeking certainty in uncertainty.
