Pulais: The Federal Reserve no longer providing forward guidance will become the new normal

According to the Zhitong Finance APP, Blerina Uruci, Chief Economist of PNC Financial Services Group in the U.S., stated that the Federal Reserve's cessation of forward guidance will become the new normal, and it will not be easy for the market to adapt to this policy environment. Waller has repeatedly emphasized that although the FOMC has not raised interest rates, bond yields have risen significantly, and financial conditions have tightened. In her view, this essentially means that the market has already taken on some of the tightening policy work that the Federal Reserve would have done. However, Waller's "hawkish" remarks alone are not enough to ensure price stability. The market may come to understand in a more difficult way that the lack of forward guidance means that even if investors have fully reflected a certain policy outcome, Waller and the FOMC may not necessarily act according to market expectations.

Blerina Uruci pointed out that the FOMC press conference has prompted investors to rethink how to interpret the recent "hawkish" remarks from Fed Chair Waller and whether he is truly ready to raise interest rates. The baseline scenario remains that the FOMC will keep interest rates unchanged, but the policy risks are two-sided. Given that there are several dissenting members within the FOMC and the uncertainty surrounding oil prices, the market currently prices the chance of a rate hike in September at about fifty percent, which is reasonable.

However, if inflation shows signs of slowing as expected and oil prices do not surge, the FOMC may ultimately remain on hold in September. The market will continue to test the Federal Reserve's policy stance and may need to wait for inflation data to force a change in perspective before reducing bets on rate hikes.

The lack of forward guidance can easily confuse the market, and investors can only continuously reassess reasonable policy pricing based on the economic data released daily. In a situation where there is high uncertainty regarding inflation, economic growth, and the job market outlook, this will lead to greater market volatility. Currently, people are not only in a highly uncertain macro environment but have also not fully grasped the Federal Reserve's new policy response mechanism, creating a dual uncertainty.

She believes that Waller's repeated discussions on how artificial intelligence can create conditions for future economic growth are essentially "dovish." Artificial intelligence is expected to significantly expand the economy's supply capacity, but it is still difficult to determine when this transformation will actually occur. Waller stated that since the June meeting, higher yields have been playing a role in tightening financial conditions for the Federal Reserve, which she believes also carries a "dovish" implication. For some investors, her remarks sound more like a limited commitment to eventual rate hikes rather than the strong signal that the market originally expected, clearly indicating a rate hike in the short term. Therefore, it is not surprising that long-term U.S. Treasury bonds have been significantly sold off