Powell Announces Latest Adjustments to Monetary Policy Framework, Employment and Inflation Response Strategies More Flexible

Federal Reserve Chairman Powell announced the latest adjustments to the Federal Reserve's monetary policy framework, which is a strategic document guiding the Fed's long-term decisions. This includes clarifying a shift in 2020, whereby officials will not raise interest rates prematurely due to a low unemployment rate to prevent inflation. He stated that decision-makers still agree that rates do not need to be raised solely based on estimates of long-term unemployment levels. However, the 2020 revision "was never intended to permanently abandon the ability to preemptively raise rates when the labor market is strong." In the latest adjustments, officials removed the previous statement that "decisions will be based on assessments of employment below maximum levels," replacing it with "employment may sometimes be above the maximum employment level assessed in real-time, but it does not necessarily pose a risk to price stability." This indicates a decreased tolerance for an overheating labor market while retaining the Fed's policy flexibility. "If the labor market is tight or other factors pose a risk to price stability, preemptive action may be necessary," Powell said.

(Source: Jinshi Data App)

In simple terms, the Federal Reserve will cut interest rates in September, which is very positive!