Group 1: Federal Reserve's Monetary Policy Insights - Powell's speech indicates rising employment risks, suggesting a more proactive rate cut approach in the second half of the year, aligning with previous assessments[3] - The adjustment in the Fed's monetary policy framework reflects a reduced tolerance for high inflation and an increased tolerance for low unemployment, adapting to the current economic environment[3] - If the August non-farm employment data does not exceed expectations, a rate cut in September is highly probable[3] Group 2: Market Reactions and Economic Indicators - Following Powell's dovish remarks, the Dow Jones, S&P 500, and Nasdaq rose by 1.9%, 1.5%, and 1.9% respectively, while the 10-year Treasury yield fell by 7 basis points to 4.26%[4] - The U.S. economy is facing headwinds, with a 10% year-on-year increase in business bankruptcies in the first half of the year and a continuous decline in core GDP growth[9] - The labor market remains tight, with a participation rate around 62.5%, 0.6 percentage points below pre-pandemic levels, and a high job vacancy rate[24]

Group 1 - The core viewpoint of the report indicates that the balance of risks facing the US economy is shifting, with increasing downward risks in the job market as both supply and demand are slowing [3] - The report highlights that the probability of a rate cut in September has significantly increased, with market expectations rising from 75% to 90% following Powell's speech [3] - The future path of interest rate cuts remains dependent on economic data, particularly inflation, employment, and consumption trends [3] Group 2 - The report anticipates that inflation may rebound in August, and a decrease in immigrant labor could offset the impact of slowing labor demand on the unemployment rate, which is expected to remain low [3] - If inflation rises less than the unemployment rate in August, the Federal Reserve may opt for a rate cut in September; conversely, if inflation rises more, the Fed may delay until October [3] - The report suggests that the Federal Reserve may cut rates again in December and that there is significant uncertainty regarding the timing of future cuts next year, influenced by both economic dynamics and the White House's pressure on the Fed [3]

Core Viewpoint - The annual Jackson Hole Global Central Bank Conference highlighted Federal Reserve Chairman Jerome Powell's speech, which is seen as a pivotal moment in his tenure, signaling a strong dovish stance that has led to a significant increase in market expectations for a rate cut in September [1][2]. Group 1: Market Reaction - Following Powell's speech, the three major U.S. stock indices experienced substantial gains, with the Dow Jones Industrial Average rising by 1.89%, the Nasdaq Composite increasing by 1.88%, and the S&P 500 climbing by 1.52% [1][2]. - The market's positive response is attributed to Powell's strong dovish signals, which have pushed the probability of a rate cut in September to over 90% [1]. Group 2: Policy Framework Changes - Powell's speech is viewed as a summary of his years as Fed Chairman, where he acknowledged the limitations of the previous monetary policy framework and announced a significant adjustment, interpreted as a correction of past policy mistakes [2][4]. - The Federal Reserve's core mission revolves around "stabilizing prices" and "promoting maximum employment," which often leads to a balancing act between these conflicting goals [2]. Group 3: Historical Context - In August 2020, the Fed, under Powell's leadership, revised its monetary policy framework to adopt an "average inflation targeting" approach, allowing inflation to exceed the 2% target temporarily as long as the long-term average remains around 2% [4][6]. - This framework influenced the inflation trajectory post-COVID-19, as the Fed maintained a low-interest rate policy despite rising inflation rates in 2021, due to the previous years' low inflation data [4][5]. Group 4: Future Implications - The recent policy shift allows the Fed to respond more flexibly to current inflation data, potentially leading to a rate cut in September, with expectations of a 25 basis point cut or even a 50 basis point reduction [8]. - The adjustment in the Fed's policy framework is expected to have significant implications for global liquidity, potentially alleviating capital outflow pressures in emerging markets and weakening the dollar, which could boost commodity prices [8][10].