The Fed's statement went viral, but the whole world misunderstood it.
Original
The Greatest Trader
Wall Street Intelligence Circle
June 25, 2025 07:12
Germany
1930 people
On Tuesday, a peculiar scene unfolded in the financial markets: U.S. stocks and U.S. Treasuries soared simultaneously, with risk assets and safe-haven assets rising together. This is not a healthy, harmonious market.
The rise in the U.S. stock market is easy to understand, as tensions in the Middle East have eased, and Israel and Iran have called a truce. The rise in U.S. Treasury bonds, however, is due to the market misreading Fed Chair Powell's remarks.
The headline "Powell: If inflation pressure is indeed controlled, we will lower rates as soon as possible" went viral last night, but it was not the true intention Powell wanted to convey.
First of all, this statement was not part of Powell's prepared speech. Yesterday he testified before the House of Representatives, and according to the process, Powell first delivered his testimony (the semiannual monetary policy report submitted to Congress) and then answered questions from congressional members. The aforementioned statement was part of the latter, where Republican Congressman Mike Lawler pressured Powell on why the Fed has not chosen to cut rates despite cooling inflation, and Powell's response followed.
Considering the scene at the time, the atmosphere was quite subtle:
Question (Interrogation): Last time the data was so bad, you lowered rates by 50 basis points during Biden's term. Now that inflation is cooling, why haven’t you lowered rates yet?
Answer: If inflation pressure is indeed controlled, we will lower rates as soon as possible.
In this context, Powell was merely responding to when rates would be cut, rather than expressing that they would cut rates "as soon as possible" (a passive response, not an active signal). Additionally, he immediately followed up with, "I don't want to pinpoint a specific meeting; I think we don’t need to rush."
Secondly, Powell's condition for cutting rates is "inflation pressure being controlled," but from his speech, he still holds a cautious attitude towards inflation. In his submitted (semiannual monetary policy report), he mentioned inflation 12 times: the inflation rate remains at a certain high level... inflation effects may also be more persistent... the duty is to stabilize long-term inflation expectations and prevent one-time price increases from evolving into a sustained inflation problem...
Overall, Powell's speech "refuted the claims of a July rate cut" and "reiterated that there is no rush to lower rates."
Before Powell made the above statement, two Fed governors recently indicated that since inflation has not risen due to tariffs, the earliest rate cut may happen in July. Therefore, Powell's words can easily be taken out of context, as the market has recently been eager for rate cuts and positive news, automatically interpreting any potentially dovish statements through a colored lens.
Powell's final thought at the end of the (semiannual monetary policy report): For now, it’s best to wait and understand more about where the economy may be headed before considering adjustments to our policy stance.$BTC #
