What is the magic of Powell's speech last night?

The market initially fell but then turned around!

In his speech, Powell affirmed the Fed's remarkable achievements in fighting inflation, but he also emphasized that before taking any monetary policy easing measures, the Fed needs to be more confident that inflation can continue to fall back to a target level close to 2%.

He predicted that the US inflation rate is expected to remain in a low range of around 2.5% in the next year.

Faced with the question of whether it is possible to cut interest rates in September, Powell was cautious and made it clear: "I have not set a specific timetable for rate cuts at present."

In addition, Powell also shared the positive aspects of the US economy, pointing out that the US economy is growing steadily, the labor market is strong, and is gradually reaching a more balanced state. He mentioned that if the labor market unexpectedly becomes weak, the Fed will make adjustments quickly.

In particular, Powell pointed out that inflation in the US service industry is relatively stubborn and closely related to wage levels, showing the complexity of inflation control.

He reiterated that the current monetary policy is still appropriately restrictive and has observed the expected effects of high interest rates on the housing market. This series of statements shows that the Fed is confident in the current policy path.

Interestingly, the market reacted quickly and with obvious differentiation: the Nasdaq and S&P 500 indexes rebounded quickly after Powell's speech, turning from decline to rise. As of 23:00 Beijing time, they rose by 0.28% and 0.08% respectively. However, the cryptocurrency market failed to rise synchronously, but fell instead, which was mainly attributed to investors' disappointment with Powell's failure to clarify the timing of the interest rate cut.

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