The statement of Federal Reserve Chairman Powell has undergone a major change.
At 2 a.m. on August 1, Beijing time, the Federal Reserve announced that it would maintain the target range of the federal funds rate at 5.25% to 5.50%. This is in line with market expectations. Since September last year, the Federal Reserve has remained unchanged for eight consecutive meetings. However, Federal Reserve Chairman Powell said at a press conference that the interest rate cut may be as early as the next meeting, that is, the interest rate meeting in September this year. The overall view of the Federal Open Market Committee of the Federal Reserve is that the economy is approaching a level suitable for interest rate cuts. Powell said that with the cooling of the labor market and the decline in inflation, the risks of achieving employment and inflation goals continue to balance. He said that at the September FOMC monetary policy meeting, a rate cut may be an option, and if inflation data supports it, the FOMC will choose to cut interest rates as early as September. He revealed that the general view of the FOMC is that it is approaching the time point suitable for interest rate cuts, but it has not yet reached that point.
Summary of the key points of Powell's press conference:
Prospects for rate cuts: The market's feeling that the FOMC is closer to rate cuts is reasonable. The earliest rate cut will be in September. The risk of acting too early and waiting too long must be weighed. Therefore, "zero to several rate cuts this year" are all conceivable scenarios.
Inflation: The current decline in inflation is better than in 2023 and more extensive. As a result of the good data, our confidence in Jiang's continued decline towards the target of 2% has increased.
