《Cautious Rate Cut Signals: Balancing Inflation and Employment》

Key Points of Powell's Main Speech

1. Powell's Core Views

➣ Federal Reserve's Responsibility: Maintain low inflation and low unemployment

➣ Policy Direction: Implies a possible rate cut in September, but with caution

➣ Current Risks: Concerns about rising inflation (affected by tariffs and other uncertainties) and potential increases in the unemployment rate

2. Labor Market

➣ Current Situation: Weak labor market, with both supply and demand declining

➣ Reasons: A significant number of elderly individuals retired post-pandemic, leading to insufficient labor supply; companies are cutting expenses and reducing hiring demand

➣ Risks: If the trend continues, the unemployment rate may rise

3. Inflation Target Adjustment

➣ Past Policy: Flexible Average Inflation Target (FAIT), allowing short-term inflation to exceed 2% to balance long-term goals

➣ Issues: Inflation skyrocketed to 8-9% post-pandemic, exposing the limitations of FAIT

➣ New Direction: Gradually abandon FAIT and strictly maintain a 2% inflation target to prevent inflation from spiraling out of control.

4. Importance

➣ Current Situation: Interest rates are 1% lower than last year, and the unemployment rate remains low

➣ Risks: Tariffs could drive up inflation, and a weak labor market might lead to an increase in the unemployment rate.

➣ Policy Outlook: The Federal Reserve may ease policies, but will do so slowly and cautiously to balance inflation and employment risks.

In Summary

Powell emphasized that the Federal Reserve must respond cautiously to economic risks, suggesting a possible rate cut in September, but policy adjustments will proceed steadily.