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CICC: Market Should Not See Powell's Speech as the Beginning of a Series of Easing Measures
Summary: Contrary to market speculation, CICC released a research report stating that Federal Reserve Chairman Powell's speech at the Jackson Hole meeting was seen as a dovish signal for monetary easing. However, Powell's remarks did not provide a strong indication of the duration and extent of rate cuts, but rather clarified the Fed's policy reaction function ...
Contrary to market speculation, CICC released a research report stating that Federal Reserve Chairman Powell's speech at the Jackson Hole meeting was seen as a dovish signal for monetary easing. However, Powell's remarks did not provide a strong indication of the duration and extent of rate cuts, but rather clarified the Fed's policy reaction function - that is, when employment risks outweigh inflation, the Fed tends to lower interest rates. However, with significantly higher tariff rates and tightening immigration policies, employment and inflation risks coexist. If inflation risks surpass employment risks, Powell can still halt rate cuts using the same reaction function.
Therefore, the market should not view Powell's speech as the beginning of a series of easing measures, but should recognize the challenges faced by monetary policy when employment and inflation goals are contradictory. If tariffs and immigration policies further escalate stagflation pressures, putting the Fed in a dilemma, there will not be a true monetary easing in the real sense. Market risk appetite may decrease, and volatility may intensify accordingly.
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Link: CICC: Market Should Not See Powell's Speech as the Beginning of a Series of Easing Measures [Copy]
