Chairman Powell is a practitioner of Tai Chi and an old master of the water-dispensing technique. This time, compared to the past, he has exceeded expectations. He is still in a dilemma,

Factors supporting a rate cut:

Weak July non-farm payrolls → The labor market is softening, providing justification for a rate cut.

The bond market has significantly priced in a rate cut → If no signal is released, the risk is that 'the market has overreacted', which would instead increase future communication costs.

Factors opposing a rate cut:

July PPI recorded the largest increase in three years → The inflationary pressure from tariff transmission is intensifying, and the Federal Reserve cannot afford to be complacent.

Excessive political pressure → Trump directly calls for a '4-point cut', and Treasury Secretary Mnuchin urges a direct 50 basis points cut in September, making it easy for the market to perceive a loss of the Federal Reserve's independence.

This means: If Powell releases a clear commitment to a rate cut, it would be equivalent to yielding to the market and Trump; if he maintains a tough stance, it could conflict with market expectations, leading to a sudden tightening of financial conditions. Therefore, he may still only be able to speak ambiguously and practice Tai Chi, after all, he is nearing retirement, and whatever he does seems unnecessary. The optimal solution for him is to quietly bide his time and leave the issues for the next administration.

And similar to previous data forecasts, Powell's remarks also have three possible outcomes.

1. Release a rate cut signal (dovish) → The bond market continues to rally, and US stocks/Bitcoin surge in the short term.

2. Maintain strategic ambiguity (neutral to dovish) → The market may be disappointed in the short term, but will not plunge significantly, as a rate cut in September remains the baseline expectation.

3. Emphasize inflation risks (hawkish) → The bond market sharply retraces, and US stocks/Bitcoin quickly adjust.

Considering the current environment, I tend to believe he will take the second path: acknowledge risks → maintain ambiguity → emphasize reliance on data. This way, all decision-making logic can be left to the market, especially after the change of the head of the statistics bureau, as data-related issues can be shifted to Trump. And from today until the September 18 interest rate meeting, there is a whole set of non-farm payrolls, CPI, and PCE data to reference.