In his speech on September 23 at the Greater Providence Chamber of Commerce in Rhode Island, Powell (Jerome Powell) highlighted several key points/new/reiterated content, which I will summarize for you:

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📌 Main Content & Key Points

The following are important points from his speech that can affect market expectations:
1. The "hedging risk" of inflation and employment (bilateral risk)
He emphasized that the inflation risk in the near term is skewed to the upside, while the risks in the job market are skewed to the downside. This means that inflation may rebound or remain higher than expected, while employment may slow.
2. The "cautious" and flexible nature of interest rate policy
• He pointed out that the current level of interest rates (federal funds target range 4.00–4.25%) remains somewhat tight, with a "modestly restrictive" nature.
• It also emphasizes that the policy path is not predetermined. Whether to further cut or raise interest rates in the future will depend on "incoming data," changes in the economic outlook, and the balance of risks.
3. The recent decision and background of the interest rate cut.
• They recently lowered the federal funds rate by 25 basis points in the monetary policy meeting. This is the first rate cut of 2025.
• The interest rate cut is mainly due to the signs of weakness in the labor market (jobs growth slowing) and the rising risks to employment.
4. Inflation Situation & Composition Structure of Inflation
• He mentioned that PCE inflation (total inflation) and core inflation (excluding food and energy) are still higher than the same period last year, but there is still a gap with the target of 2%.
• The price increase in the category of goods is related to tariffs, representing a "one-time shift in the price level." He believes that the inflation impact of these price increases induced by tariffs should be short-term. However, it is important to note that such factors may take several quarters to fully manifest through the supply chain.
5. Latest Signals in the Job Market
• Although the overall growth of employment has slowed, some labor market indicators remain "relatively stable" (such as the ratio of job vacancies to unemployed population) and have not deteriorated significantly.
• The estimated speed of job creation is lower than the breakeven speed required to maintain the unemployment rate at the current level (.
6. Inflation Target and Long-term Inflation Expectations
• Although short-term inflation and core inflation are relatively high, long-term inflation expectations are generally still in line with the Federal Reserve's 2% target.
• The Fed emphasizes that it has a responsibility to ensure that a one-time price increase does not evolve into a persistent inflation trend.

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🧐 Meaning / Possible market interpretation
• Powell's speech is generally cautious and neutral, neither rapidly dovish nor hawkish. He acknowledges that the inflation problem has not been resolved while also observing that the labor market is cooling, requiring a balance.
• The market may interpret that: there will not be a rapid and significant rate cut in the short term, but there is room for adjustment. If employment continues to deteriorate or inflationary pressures ease, there is a possibility of further rate cuts.
• Investors will closely monitor the employment data and inflation data (especially the core inflation and the portion of commodity prices affected by tariffs) in the coming months.
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