Yesterday, I analyzed Powell's speech at Jackson Hole as 'neutral to hawkish'. The market's short-term reaction was excessive; I even think that the rise in US stocks and gold and silver starting precisely at 10 o'clock was merely because many people only heard the phrase 'the risk balance seems to be changing... we may need to adjust our policy stance' and assumed that Powell was being dovish, without even listening to the complete speech.

First, my article was published at 10:38 PM Beijing time, which is 1 PM US time, and Bloomberg published a column (Powell’s Nuance Was Lost on Markets. Too Bad.) shortly after (the market misread the nuances of Powell's speech, such a pity), authored by Jonathan Levin.

The main point of this article is roughly the same as my interpretation.

The article begins with a quote from Greenspan: 'If I seem unduly clear to you, you must have misunderstood what I said.'

The main point of the article is:

✔ The market's reaction is overly simplistic: Powell said 'the economic outlook may require an adjustment in policy stance', yet the market immediately interpreted this as 'a definite rate cut in September', triggering a rally in both stock and bond markets. The fact is that the focus of the speech was on the 'murky economic outlook' and 'balanced risks', without indicating a definite trajectory.

✔ Uncertainty about future paths: 'We will not set a pre-determined path' means that the Federal Reserve's future direction will rely entirely on economic data, rather than fulfilling current market expectations.

✔ Institutional 'hawkish shift': The article emphasizes that the Federal Reserve has systematically shifted to a hawkish stance, and once a real interest rate cut occurs, it is usually not due to successful macroeconomic conditions, but more likely due to 'economic deterioration, which is unavoidable'; easing policies in this context would differ completely from market expectations.

✔ Therefore, the author concludes that the market desires a 'shift to easing', longing for a repeat of past stimulus cycles, but the reality is that Powell presents a 'gradual trigger, step-by-step testing adjustment', far from being fully dovish.

The perspective of Bloomberg's chief US economist, Anna Wong, is highly 'similar' to my view (12:00 US time) - 'I believe Powell did not display a dovish stance today, but rather delivered a speech whose hawkish implications will only be realized after digestion over time. This initial reflexive response, which was then reversed, has happened before.

What Powell did today—a masterclass on how to 'walk the tightrope' under political pressure: he gave some hints about remaining open to the idea of rate cuts (this statement can be interpreted in both dovish and hawkish ways), while also subtly laying the groundwork for a hawkish response.

The viewpoint of Wall Street mouthpiece Nick Timiraos is also very straightforward: Powell shifted to a dovish stance again at the Jackson Hole annual meeting, but compared to last year, this statement is noticeably more cautious—given that inflation is temporarily deviating from the Federal Reserve's target and that current policy tightening has eased compared to a year ago.

Therefore, from the most exuberant performance of US stocks, it can be seen that after the sharp rise from 10 o'clock, the market almost consolidated horizontally like a straight line. This is what I mean by the market finally starting to calm down and 'digest' Powell's subtly dangerous speech.

★ Supplementing one piece of data: also from Bloomberg:

Our natural language processing (NLP) Federal Reserve speech index (Fedspeak Index), which combines the speeches and news headlines of Powell, Hammock, and Collins today, shows that the overall tone has moved in a more hawkish direction.

Secondly, of course, stopping here is not my style; what needs to be inferred next is whether the Federal Reserve will cut interest rates in September, and under what conditions? In what circumstances might the Federal Reserve continue to maintain interest rates?

★ The upcoming 'deciding fate' timeline:

August Non-Farm Payrolls (NFP): Released on September 5 at 08:30 (including unemployment rate, hourly wage).

August CPI: Released on September 11 at 08:30 (Core CPI month-on-month rate is particularly critical).

FOMC meeting: September 16-17 (with economic forecasts/dot plots). The current target range is 4.25%-4.50%; a 25bp cut would bring it to 4.00%-4.25%.

✔ A cut of 25bp or 50bp clearly indicates a continuation of rate cuts:

NFP ≤ 50,000 or negative growth (or annual revisions greater than 900,000); and unemployment rate ≥ 4.3-4.4%; while core CPI month-on-month rate ≤ 0.2%.

Wage pressures ease: Average hourly wage month-on-month rate ≤ 0.2% (≈ annualized ≤ 2.4%).

Significantly weak employment + inflation no longer rising meets Powell's description of 'increased risks of employment downturn' and the 'data dependency' prerequisite for rate cuts.

✔ A cut of only 25bp and uncertainty about further cuts:

NFP 50,000-120,000; unemployment rate 4.1-4.3%; core CPI month-on-month rate 0.2-0.3%.

In line with the Fed's 'peculiar balance' of 'weak supply and demand in the labor market', inflation has not accelerated again; this is generally consistent with current futures pricing.

✔ Maintain interest rates unchanged:

NFP ≥ 150,000 or unemployment rate falls below 4.1%; and core CPI month-on-month rate ≥ 0.3% (annualized ≥ 3.6%).

Or core goods/non-housing services prices may rise again, indicating that tariff transmission is more persistent.

It should be noted that the Fed's interest rate framework has removed the biases of 'average inflation overshoot' and 'employment shortage'; once inflation does not cooperate, the Fed will inevitably take a wait-and-see approach according to the new system.

Therefore, given the weakness in the labor market, the decisive factor in the decision to cut interest rates is still 'inflation'. It should be noted that Powell mentioned inflation 63 times throughout the Jackson Hole speech.

Sticking to an independent viewpoint is not being unconventional, but rather maximizing respect for risk.

Good morning, everyone!