『Part.2』🔥Powell's Latest Speech: What Signals Are Being Released? Will the Fed's Rate Cut Schedule Be Delayed?🚀
2. Rate cut expectations remain unchanged, but timing is more flexible
Although the pace of inflation cooling is not as satisfactory, Powell still maintained the expectation of 'possibly two rate cuts within the year.' He emphasized, 'We believe the current monetary policy is still tight, and if the economy continues to operate along the trajectory we expect, then a moderate easing of policy within the year would be reasonable.' This reflects the Fed's 'flexibility' in policy-making — they have not abandoned their plans for rate cuts, but have also not committed to a specific timeline. This strategy of maintaining direction while allowing room for adjustment reflects the Fed's dilemma between curbing inflation and safeguarding economic growth.
3. Downside risks are rising: Concerns about growth emerge
In his speech, Powell also mentioned, 'The downside risks to economic growth are increasing.' This is a rare expression of concern about the economic growth outlook in recent years. This shift may reflect a reevaluation within the Fed regarding indicators such as a weak labor market and a slowdown in manufacturing. This provides support for the 'rate cut argument.' If the trend of economic slowdown continues to manifest, the Fed may intervene sooner to avoid falling into recession.
4. Tariff impacts: A new inflation driver?
A new focal point of concern is that Powell explicitly pointed out for the first time, 'The uncertainty of recent trade policies may put upward pressure on inflation in the coming quarters.' Especially if tariff increases continue, consumer goods prices may rise again, further elevating overall inflation. This factor has rarely been mentioned in past discussions on monetary policy. If tariffs indeed create sustained upward pressure on inflation, the Fed may have to delay the planned rate cut path to maintain its inflation suppression goals.
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