Core Viewpoint - Federal Reserve Chairman Jerome Powell emphasized the flexible principle of the Fed's interest rate policy, stating that adjustments will be made based on evolving economic outlooks and risk balances, without a predetermined path [1][3] Economic Conditions - The Fed faces a policy dilemma characterized by persistent inflation pressures, with the core Personal Consumption Expenditures (PCE) price index rising 2.9% year-on-year, while the unemployment rate reached a one-year high of 4.3% in August, indicating a weak labor market [3][4] - Powell highlighted the challenge of balancing the need to combat inflation without causing unnecessary harm to the labor market, indicating that rapid rate cuts could jeopardize anti-inflation efforts, while slow actions could damage employment [3] Data Challenges - The government shutdown has created a "data vacuum," complicating decision-making as key reports, such as the September non-farm payrolls, have been delayed, and October's core economic data may not be collected [3][4] - The Fed is attempting to fill this data gap through private sector data and regional Fed networks, but Powell acknowledged that private high-frequency data cannot fully replace official statistics [3] Market Expectations - Despite the Fed's emphasis on flexibility, market expectations for a rate cut are nearly saturated, with a nearly 100% probability of a 25 basis point cut at the upcoming FOMC meeting on October 28-29 [4] - The shift in focus from "anti-inflation priority" to "balancing growth and employment" reflects the increasing influence of employment risks on short-term policy decisions [4] Policy Signals - Powell indicated that the process of balance sheet reduction (QT) may be nearing its end, suggesting a need to slow the pace to maintain market liquidity, which aligns with market expectations for a total of 50 basis points in rate cuts this year [4] - There remains internal disagreement within the Fed regarding the policy path, with only half of the 19 officials supporting two more rate cuts this year, while others prefer fewer or no cuts [4]

Core Insights - Trump's threat to impose an additional 100% tariff on China has caused significant market turbulence [2] - The Federal Reserve's meeting minutes indicate a consensus among officials for moderate easing in the current context, with potential further rate cuts expected within the year [2] - The U.S. economy shows signs of slowing growth, with actual GDP growth decelerating and a softening labor market [2] Economic Indicators - The Federal Reserve anticipates a reduction in bank reserves to approximately $2.8 trillion by Q1 2026 as part of its balance sheet normalization process [2] - The initial October inflation rate expectation in the U.S. is 4.6%, slightly lower than the previous value of 4.7% [2] - The University of Michigan's consumer confidence index for October is at 55, marking the lowest level since May, compared to an estimate of 54.2 and a previous value of 55.1 [2] Upcoming Events - Key economic indicators to be released include China's September CPI on October 15 and the U.S. September PPI on October 16 [3] - Federal Reserve Chairman Jerome Powell is scheduled to speak at an event on October 17 [3] - A G20 finance ministers and central bank governors press conference is set for October 17 [3]