Federal Reserve Chairman Powell's remarks early this morning caused quite a stir in the financial markets. In his latest statement in Washington, he mentioned that if subsequent data supports it, rate cuts may be considered this year. Although the wording remains cautious, this statement is enough to attract market attention.
What did Powell say?
He stated that, although U.S. inflation has eased somewhat compared to before, it is still above the Federal Reserve's 2% target level. Meanwhile, the job market remains strong, with the unemployment rate holding at a low of 4.2%. However, he also emphasized that monetary policy will be highly dependent on data performance in the coming months, and there is no rush to make decisions.
This statement seems stable on the surface, but in reality, it leaves room for imagination.
The market reacted quickly
- The three major U.S. stock indices collectively fell, with the Dow Jones Industrial Average once down over 300 points;
- The yield on the 10-year U.S. Treasury bond quickly rose, breaking through the 4% mark;
- The crypto market was also not spared, with Bitcoin dropping nearly 8% within half an hour and Ethereum showing a significant correction.
This indicates that although the market has heard the possibility of 'rate cuts', the expectation for a policy shift in the short term has not increased; instead, some investors are worried that the rate hike cycle may be extended.
Here come three key observation points!
If you are an investor, the following things must be closely monitored:
1. Next week's non-farm payroll report
If the data unexpectedly weakens, it could become the last straw that breaks the Federal Reserve's hawkish stance.
2. CPI inflation data to be released on June 12
Whether inflation can drop below 4% will become an important criterion for judging whether there are conditions for a rate cut.
3. Update of the dot plot after the June FOMC meeting
If the committee members generally lean towards a 'dovish' interest rate path, then expectations for rate cuts will heat up again.
What should investors do?
Don't rush to bet on the direction; now is not the best time to take action:
- Make adjustments to your positions and control your risk exposure;
- Set a reasonable stop-loss mechanism to avoid being thrown off by short-term fluctuations;
- Observe changes in market sentiment and do not blindly follow the trend.
Although Powell's tone has softened this time, he has also left room for maneuver—everything depends on the data. In other words, he did not make a commitment, only provided a possibility. Such a 'partially open and partially closed' signal often leads to sharp fluctuations.
So let me remind you: the real test may come before July. Rather than betting on direction, it's better to focus on strengthening defense first. This game is about patience and execution, not just who shouts the loudest.
