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 Fed's monetary policy framework, which serves as a strategic document guiding the Fed's long-term decisions. This includes clarifying a shift from 2020, stating that officials will not raise interest rates prematurely to prevent inflation simply due to a low unemployment rate. He indicated that decision-makers still agree that raising rates should not solely be based on estimates of the long-term unemployment rate level. However, the 2020 revision "was never intended to permanently abandon the ability to raise rates preemptively 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 at times be above the real-time assessment of maximum employment but does not necessarily pose a risk to price stability." This indicates a decreased tolerance for an overheated labor market while retaining the Fed's policy flexibility. "If the labor market is tight or other factors pose risks to price stability, preemptive action may be necessary," Powell stated.

(Source: Jinshi Data App)

In short, the Fed will lower interest rates in September, which is very favorable!