Recently, Federal Reserve Chairman Powell made it very clear at a press conference: how monetary policy will proceed in the future mainly depends on the unemployment rate. As soon as this statement was made, the financial markets erupted, and everyone was pondering what it meant.
Powell's attitude is quite clear; he regards the unemployment rate as an important basis for assessing the economy's conditions. What does this mean? If the unemployment rate remains low, the likelihood of an interest rate cut in September is not that high. This statement is actually an explanation for everyone: if the job market is still relatively strong, waiting for loosening policies (such as interest rate cuts) might take a long time.
However, that said, although Powell also mentioned that consumer spending is rising slowly and GDP growth is lackluster, these indicators are not prioritized in his mind; the unemployment rate is the focal point. Because of this, various speculations are circulating in the market, and many people are still skeptical.
But not everyone within the Federal Reserve is on the same page. It is said that some officials are not very satisfied with Powell's hardline stance and have publicly stated that they want to ease up quickly. Such situations are rare in the history of the Federal Reserve, indicating that the current economic situation is indeed complex, and decision-making is not an easy task.
Why can Powell be so persistent? Mainly because the current employment data looks decent. The strict immigration policies have reduced the number of people coming to work in the U.S., which somewhat helps support the employment market. But how long this apparent stability can last is uncertain.
Moving forward, regardless of how the economy changes, the policy direction of the Federal Reserve will certainly cause the global financial market to react. Investors and economic analysts need to keep an eye on key figures like the unemployment rate to accurately predict how the next policy will proceed.
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