Core Viewpoint - Federal Reserve Chairman Jerome Powell signaled a cautious approach towards potential interest rate cuts, emphasizing the heightened uncertainty that complicates monetary policy decisions [1][3][6]. Group 1: Interest Rate Expectations - Traders currently estimate a 90% probability of a rate cut in September, up from 75% prior to Powell's speech [1]. - The market is pricing in two rate cuts by the end of the year [1]. Group 2: Economic Conditions - Powell noted that while the labor market remains robust and the economy shows resilience, downside risks are increasing [3][6]. - He warned that increased tariffs could lead to new inflationary pressures, raising the risk of stagflation, which the Fed aims to avoid [3][6]. Group 3: Policy Framework Review - Powell discussed the Fed's five-year review of its policy framework, acknowledging past mistakes in underestimating inflation, which reached a 40-year high [7]. - The Fed reaffirmed its commitment to a long-term inflation target of 2%, which is seen as crucial for maintaining stable inflation expectations [7].

Core Viewpoint - The article emphasizes the need for a more thoughtful selection process for the next Federal Reserve Chair, focusing on improving the Fed's overall performance and accountability rather than short-term market considerations [1][2]. Group 1: Federal Reserve's Current Challenges - President Trump has called for significant cuts to the federal funds rate to stimulate economic activity, which could lead to excessive inflationary monetary policy and increase borrowing costs for the government, households, and businesses [1]. - Concerns about the Fed's independence in setting monetary policy may undermine confidence in U.S. financial markets and further depress the dollar's value [1]. - The Fed has made mistakes under Powell's leadership, resulting in high inflation and unclear monetary policy strategies [1][2]. Group 2: Key Policy Issues for the Next Chair - The dual mandate of the Fed—ensuring price stability and full employment—has been criticized, particularly regarding the Fed's inflation bias in 2021 and 2022, raising questions about the appropriate weighting of inflation and employment [2]. - The Fed's balance sheet has expanded significantly since the 2008 financial crisis, leading to questions about the necessary size and composition of the balance sheet for effective monetary policy [2]. - Financial regulation reforms are needed to avoid costly pressures in the U.S. Treasury market, and the Fed must distinguish its regulatory activities from monetary policy to maintain independence [2][3]. Group 3: Recommendations for Improvement - The Fed should embrace diverse economic viewpoints to better address the evolving economic landscape and avoid groupthink tendencies that can lead to policy errors [3]. - The selection process for Fed officials should prioritize knowledge and experience diversity rather than political motivations, ensuring a broader range of perspectives [3]. - The next Fed Chair should possess knowledge of monetary policy and financial regulation, independent judgment, and an openness to new ideas that can enhance institutional performance and accountability [3].

Core Insights - The upcoming Jackson Hole Economic Symposium is a key event for observing Federal Reserve dynamics, with a focus on Chairman Powell's speech on August 22 [2][7] - Powell faces a dilemma between continuing anti-inflation measures and addressing employment concerns, amid mixed economic data [2][7] Economic Data Summary - July non-farm payrolls showed only 73,000 new jobs, significantly below market expectations, with a three-month average job growth of approximately 35,000 [2] - The Producer Price Index (PPI) rose by 0.9% month-on-month in July, the largest increase in nearly three years, driven by tariffs and supply chain costs [2] - The Consumer Price Index (CPI) increased by 2.7% year-on-year, with core CPI at 3.1%, slightly above the Fed's 2% target, but overall inflation remains moderate [2] Market Expectations - Investors anticipate a potential 25 basis point rate cut at the September policy meeting, although recent wholesale price increases have tempered these expectations [3] - The focus is on how Powell will communicate future policy directions, with emphasis on data-driven decision-making [3] Policy Framework Review - The Fed is reassessing its policy strategies and communication methods, with expectations for Powell to announce the latest results of the monetary policy framework evaluation at Jackson Hole [3] - The previous framework introduced a "flexible average inflation target," but recent inflation trends may lead the Fed to reconsider this approach [3] Historical Performance Insights - Historically, U.S. stocks have performed well during Jackson Hole week, with a median increase of 0.8% since 2009, and only five instances of declines [4] - U.S. Treasury returns during this period have also been positive, with a median return of 0.2% for long-term bonds [6] Current Market Sentiment - Investors are preparing for potential volatility ahead of the Jackson Hole meeting, with recent dissent among Fed governors indicating increased policy divergence [6] - There are concerns that Powell's acknowledgment of a weakening labor market could pressure stock valuations, which are currently at historical highs [6][7]

Core Insights - The Federal Reserve is undergoing a regular evaluation of its monetary policy strategy, focusing on two main adjustments: downplaying the controversial inflation target strategy and reforming the policy communication system [1][2] Group 1: Inflation Target Strategy - The Federal Reserve is expected to downplay the "Flexible Average Inflation Targeting" (FAIT) policy introduced during the pandemic, returning to a more traditional inflation target setting [2] - Critics argue that the FAIT policy delayed the Fed's response to rising inflation, exacerbating inflationary pressures [2] - Analysts predict that the Fed will shift its focus to responding to deviations in both inflation and employment, rather than solely on employment shortfalls [2] Group 2: Communication Strategy - Upgrading communication tools is a significant aspect of the current evaluation, potentially having a more substantial impact than changes to the monetary policy strategy itself [3] - Proposed reforms aim to enhance policy transparency, helping investors better understand the Fed's decision-making process [3] - These adjustments are expected to stabilize market expectations and reduce the risk of policy misjudgments in the medium to long term [3] Group 3: Alternative Economic Scenarios - One proposal includes providing alternative economic scenarios to highlight risks, which could offer valuable real-time information to investors if linked to interest rate predictions [4] - Another proposal suggests that Federal Open Market Committee members' economic and interest rate forecasts be correlated while maintaining anonymity, allowing investors to understand individual members' perspectives [4]

Group 1 - The core viewpoint is that the era of ultra-low interest rates and aggressive monetary policies is over, as the U.S. enters a "new normal" of high inflation [1][3] - Powell acknowledges a fundamental shift in the global economic landscape since 2020, necessitating a reevaluation of the previous monetary policy framework [3][8] - The previous framework relied on a "flexible average inflation target" to manage short-term inflation spikes, but this approach is now deemed inadequate [6][19] Group 2 - Powell's statement indicates that the zero lower bound on interest rates is no longer a baseline scenario, marking a significant policy shift [8][9] - The actual interest rates adjusted for inflation are rising, signaling deeper economic changes rather than mere cyclical fluctuations [9][11] - The previous reliance on globalization for price stability is diminishing, as geopolitical tensions and supply chain disruptions have emerged [11][15] Group 3 - The Fed's tools and methodologies must be rethought in light of the changing economic environment, with a reduced emphasis on traditional employment metrics [15][17] - The "flexible average inflation target" is under review, as it has struggled to cope with the pressures of the pandemic and geopolitical risks [19][21] - Powell emphasizes the importance of maintaining a 2% inflation target as a guiding principle, despite market speculation about potential adjustments [21][27] Group 4 - The central bank's role is evolving to address more frequent and persistent supply shocks, which cannot be managed solely through interest rate adjustments [21][23] - The communication strategy of the Fed is also being reassessed to better convey the complexities of the current economic landscape [25][27] - The global economy may experience a bifurcated state, with Western economies facing high inflation and low growth, while production-oriented economies may struggle with overcapacity and low inflation [27][29]

Group 1 - The core viewpoint of the news highlights the weak performance of the U.S. retail market, which raises concerns about economic growth and boosts expectations for interest rate cuts, benefiting gold prices [1] - U.S. retail sales for April showed a month-on-month increase of 0.1%, surpassing market expectations of 0.0%, while March's data was revised significantly upward to a growth of 1.7% [1] - The control group data, which directly impacts GDP, decreased by 0.2%, contrary to market expectations of a 0.3% increase, casting a shadow over the start of the second quarter [1] Group 2 - Federal Reserve Chairman Jerome Powell acknowledged that "supply shocks" may become the new normal, indicating that higher real interest rates could reflect more volatile inflation in the future [1] - The Fed's 2020 policy framework may shift focus away from employment gaps, as Powell stated that the central bank might not overly prioritize employment in the future [1] - The Fed adopted a "flexible average inflation targeting" approach, allowing inflation to exceed 2% for a period after being below that level for an extended time [1] Group 3 - Technical analysis of gold indicates a potential upward trend, with a recent price increase from 3120.0 to a peak of 3250.0, suggesting a possible shift in market momentum [4] - The trading strategy for gold suggests attempting to buy near 3211.0, with a stop loss at 3203.0 and targets set at 3231.0 and 3265.0 [2] - Silver prices also showed a bullish trend, recovering above the previous low of 31.87 and reaching a high of 32.67, indicating a potential upward movement [6]

Core Insights - The Federal Reserve is reassessing key components of its monetary policy framework, including inflation targets and the handling of employment gaps, in response to changing economic conditions [2][3] Group 1: Monetary Policy Framework Changes - The current monetary policy framework established in 2020 is deemed unsuitable due to significant changes in economic conditions post-pandemic [3] - Powell emphasized that the zero lower bound on interest rates is no longer a baseline scenario, indicating a shift in the Fed's approach to interest rates [3][10] - The review of the framework will focus on effective communication regarding economic uncertainties and the Fed's understanding of the economic outlook [12] Group 2: Employment and Inflation Targets - The Fed is moving away from an excessive focus on employment gaps, which previously influenced preemptive rate hikes to cool the labor market [4][5] - The concept of a "flexible average inflation target" is under reconsideration, as critics argue it is not suitable for the post-pandemic economic environment [7][8] - Despite the framework revisions, Powell reaffirmed the importance of maintaining a 2% inflation target, which is crucial for anchoring expectations [10] Group 3: Economic Challenges Ahead - Powell warned of a potential new normal characterized by more frequent and persistent supply shocks, posing challenges for both the economy and the central bank [11] - The possibility of higher long-term interest rates is anticipated as a reflection of increased volatility in future inflation compared to the 2010s [2][9]