What did the Fed say tonight? Let me summarize!

On the evening of July 9th, Beijing time, Fed Chairman Powell delivered a semi-annual monetary policy testimony to the Senate Banking Committee. His main points are as follows:

- Inflation has slowed significantly, but it is still above the 2% target, and recent inflation data show that "modest" progress has been made toward the 2% target.

- Before the Fed's confidence in inflation continuing to move toward 2% increases, it is not appropriate to cut interest rates; premature and excessive easing of policies may harm inflation progress. The Fed will continue to make decisions one by one.

- Firmly committed to the 2% inflation target and keep long-term inflation expectations stable. - The labor market is strong, but not overheated.

- The risks of achieving employment and inflation targets are "better balanced." The U.S. economy is growing at a "solid pace."

- Restrictive policies help to put downward pressure on inflation. Reducing restrictions too early or too much has the risk of reversing the inflation process. Reducing restrictions too late or too lightly may excessively weaken the economy and the job market.

- Q1 data "does not support" greater confidence in the inflation path, which is exactly what the Fed needs to cut interest rates. GDP growth in the first half of 2024 appears to have slowed.

- The Fed's operational independence requires maintaining a long-term perspective in pursuing its goals.

In terms of market reaction, U.S. Treasury yields fluctuated but rose during the day; the S&P 500 index maintained its gains.

Traders expect the Fed's first rate cut in September to be slightly more than 70%, and expect two 25 basis point rate cuts in 2024.

Powell's speech showed that the Fed's attitude towards inflation is still relatively cautious, emphasizing that policy decisions will depend on the performance of economic data.

The market's expectations for the Fed's rate cuts have also been adjusted to a certain extent. However, the specific policy direction still needs to pay attention to subsequent economic data and more statements from Fed officials.

The above content is for information sharing only and does not constitute any investment advice! Investment is risky and you need to be cautious when entering the market!

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