Powell poured a bucket of cold water on the market again this week. He repeatedly emphasized that the most critical economic signal right now is no longer inflation, but the unemployment rate. The unemployment rate in June is still at 4.1%, which has hardly changed for almost a year, while inflation is still far from the 2% target. In this context, the Federal Reserve is in no rush to move interest rates; their stance is very clear: maintaining stability is more important than anything else.

The market was originally hoping that Powell could give some signals, such as whether there is a possibility of a rate cut in September, but the result of his speech this time basically amounted to “playing Tai Chi,” revealing no substantive remarks. More awkwardly, the inflation data released on Thursday exceeded expectations, shattering the market's last glimmer of hope for a rate cut.

Ultimately, the Federal Reserve is now focused on one signal—the unemployment rate and whether it will start to rise significantly. As long as the job market remains stable and inflation cannot be suppressed, they will not hastily cut rates. Powell's underlying message is actually quite clear: we will not ease monetary policy until there are problems in the job market.

This also makes the July non-farm payroll and unemployment rate data on Friday particularly crucial. If the unemployment rate does start to rise, the Federal Reserve may then consider a shift. But the question is—by the time they really take action, will the market's risks have already begun to concentrate and explode?

The current situation is actually quite awkward: inflation cannot be suppressed, and employment is too strong, leaving the Federal Reserve in a dilemma. However, from Powell's attitude, it seems they are determined to continue fighting inflation and will not easily shift their stance, even if the market is already struggling to breathe.