On Wednesday, July 26, after the Fed's interest rate meeting, Fed Chairman Powell held a press conference. At the press conference, Powell expressed his views on the Fed's policy path, U.S. inflation, the U.S. economy, and the labor market. ## Inflation has eased but is more resilient than expected, but there is still a long way to go from the target of 2% **On inflation in the United States, Powell reiterated:&gt; The Fed is committed to a dual mission and is committed to bringing inflation back to 2%. A strong labor market cannot be achieved without price stability. Powell said inflation in the U.S. has eased to some extent, but there is still a long way to go to bring inflation back down to **2%. He acknowledged that inflation had proved more resilient than expected. In the past, inflation has repeatedly been higher than expected, but that could change. * * Powell said that high inflation has brought major difficulties, and long-term inflation expectations are still &#34;deeply rooted&#34;:&gt; The Fed is highly concerned about the risks that inflation poses to the agency's dual mission, and the best thing the FOMC can do is to restore price stability. Powell believes that over time, the U.S. economy will grow more strongly in the future, which may increase inflation or require a policy response. In addition, Powell believes that Russia's withdrawal from the Black Sea food agreement is not expected to have a significant impact on U.S. food inflation. ## Interest rates have reached a restrictive level and will remain there for an extended period of time, with no rate cuts during the year On the current rate hike cycle, Powell said the Fed's monetary policy is working and is in line with expectations. However, the full impact of the interest rate hike has not yet appeared, and it will take time to achieve the full effect. He emphasized that the FOMC will consider the cumulative policy tightening effect and lag, but there is a lot of uncertainty and controversy about the maintenance time of the lag period. He believes that the current real federal funds rate is already in a meaningful positive range. He said the Fed doesn't expect to see inflation return to 2% policy target level until 2025 years or so, and the Fed can stop raising rates until inflation reaches 2%. He said that at present, there is every reason to slow down the pace of rate hikes, the FOMC will remain data-dependent on the future process of rate hikes and will continue to make a decision on whether to raise rates at meeting-by-meeting :&gt; We have not yet made a decision on any future meetings. A more gradual pace of rate hikes does not mean every other meeting. The FOMC believes that current monetary policy is restrictive and that interest rates need to be kept high **** &#34; for a period of time **** &#34; and that inflation needs to continue to be resisted, which also needs to be sustained for a period of time: ** &gt; ** Policy is already restrictive, and even more so after today. **** FOMC **** can be patient and firm. **** He believes that as the monetary stance becomes more restrictive and the risks faced are increasing, the problem now is how to weigh the risks of doing too much or too little. Powell said: ** &gt; ** If we see a reliable easing of inflation, there is no need for tightening measures. If we see a steady decline in inflation, we can reduce interest rates to a neutral level and then drop below the neutral level at some point. **Powell said that the slowdown in CPI in June was encouraging, but it was only one month's data, and the inflation report was slightly better than expected. He believes that it is a good thing that the overall inflation rate has fallen so much, which will enhance the public's perception of the decline in inflation. But right now, core inflation is still quite high and would like to see core inflation fall. He re-emphasized that core inflation is a better indicator of overall inflation. Powell also said:&gt; We will proceed cautiously and will not over-interpret the single inflation data and will be concerned about whether the CPI data will fall again thereafter. In particular, Powell stressed the importance of the integrity of the data, with a particular focus on inflation progress. Powell said: **If the data is supportive, the Fed may raise interest rates again in September. **There are 8 weeks until the September FOMC meeting, and we will keep an eye on all the data until then. We do not wish to provide forward guidance. **On tapering, Powell said that interest rate adjustments and tapering are independent and that the Fed may cut interest rates at the same time as tapering. **Powell said that when determining when to cut interest rates, both the level of inflation and the speed at which inflation is falling need to be considered:&gt; **There is a lot of uncertainty about the outlook for future meetings and even next year. I don't think there will be a rate cut this year, which will depend on how confident we are that inflation will fall back to target. However, some **** FOMC **** members expect a rate cut next year. **Powell said that there are different views in this meeting, and the market will see this in the minutes of the meeting. ## The Fed no longer believes that the U.S. economy will fall into recession, and a soft landing path still exists When it comes to the U.S. economy, Powell said that U.S. economic activity is expanding at a moderate rate and consumer spending growth is slowing from the beginning of the year. The Fed's assessment of economic activity has improved compared with its assessment of the US economy as &#34;moderate&#34; in June. He stressed:&gt; The economic weakness we see is not due to rising unemployment, but due to fewer job vacancies and fewer separations. By industry, Powell believes that some industries have been reflecting the impact of tightening. In addition, the overall economy shows that credit conditions are tightening. Powell said lowering inflation could mean driving down economic growth to below-trend levels. Powell said that the resilience of the US economy is &#34;a good thing&#34;, but at the margin, stronger economic growth may lead to more inflation. He believes that U.S. economic growth will strengthen in the future. He said that Fed staff no longer predict that the U.S. economy will fall into recession:&gt; My basic assumption is that the 2% **target can be achieved without a significant increase in unemployment. **Powell reiterated that achieving a degree of inflation decline without triggering a surge in unemployment, that is, achieving a&#34; soft landing &#34;is a desirable outcome, but in reality, weakness in the labor market is still a possible outcome. I wouldn't use the word &#34;optimistic,&#34; but there is a path to a soft landing. Even with a soft landing, labor conditions would weaken somewhat. Powell said the FOMC wants to see supply bottlenecks ease and wants to see moderate or moderate levels of economic growth. ## The trend towards equilibrium in the labor market is becoming more pronounced, but further easing is needed On the labor market, Powell believes that there are growing signs of a continued balance between labor supply and demand. He believes that the US labor market is still very tight, employment growth is still strong, and labor demand still significantly exceeds supply. Therefore, labor market conditions need to be further relaxed. Powell said nominal wage growth has shown some signs of easing, but real wage growth is a good thing. This also means that the &#34;wage -inflation spiral&#34; that the market was once very worried about may not appear. Powell said the Fed's wage growth is in line with the 2 percent target inflation rate. He stressed that the Fed is not specifically targeting wage inflation. Powell said the FOMC is looking for signs of widespread weakness in the labor market, with the latest report showing a slowdown in the private sector job market. ## Higher interest rates are a drag on the housing market, the banking sector has stabilized When it comes to the U.S. real estate market, Powell said the housing sector has recovered, but it is still well below 2022 levels. He believes that there is still a long way to go to restore the balance of the real estate market, and the existing housing supply is very tight. However, higher interest rates have slowed the growth of the real estate market. Regarding the banking turmoil, Powell said that it is difficult to sort out the impact of the banking turmoil on the economy. The Federal Reserve is carefully monitoring the situation of the banking industry. At present, the US banking industry has stabilized. Referring to the banking crisis, Powell said U.S. banks are now trying to ensure they are prepared to use the discount window, and the Federal Reserve is encouraging them to do so. ## Market reaction and comments During Powell's press conference, the Standard &amp; Poor's 500 Index and the Nasdaq Composite Index gave up their earlier gains and turned down. Among them, the S &amp; P 500 index fell 0.2 percent and the Nasdaq composite index fell 0.4 percent. The Dow Jones industrial average is still up, but gains are limited. Bond yields fell, with the two-year U.S. yield, sensitive to the Fed's upcoming action, falling to 4.84 percent. The Wall Street Journal reporter, known as the &#34;New Fed News Agency&#34;, said in an article published after the press conference that the differences within the Fed have not been bridged:&gt; Some Fed officials said that they may be more willing to raise interest rates again at the September meeting. However, officials who believe that the impact of the Fed's rate hike has not yet been fully apparent are more likely to prefer to wait until November or December before deciding whether the next rate hike is appropriate. Angel Ubide, head of global fixed income economic research at hedge fund Citadel, believes that as the Fed enters the closing phase of the current rate hike cycle, it makes sense to slow down the pace of rate hikes:&gt; for the last kilometer of the tightening cycle, it makes sense to extend it over time. The Fed is fine-tuning, and they don't know exactly where the destination is. Frances Donald, global chief economist at Manulife Investment Management, believes that the threshold for the Fed to start cutting interest rates is very high and actual data are needed. These data may be realized by the end of the year, when the Fed may have confidence to better control inflation:&gt; We now believe that the Fed is in a long-term 'hawkish position '. Under our basic assumptions, their next move could be a rate cut, but it won't be seen until 2024. Still, Powell had little choice but to continue to warn the market about the possibility of a rate hike, so as not to encourage the market to prematurely digest rate cuts and reignite inflation expectations. Sonu Varghese, an analyst at asset manager Carson Wealth, said Powell kept his options open, but the Fed was unlikely to raise rates again. Varghese expect inflation reports ahead of the September meeting to show weaker prices. He said:&gt; The Fed wants to see inflation fall, especially core inflation, but they don't necessarily need to see the economy weaken.

Powell said that inflation in the United States has been somewhat alleviated, but there is still a long way to go to bring inflation down to 2%. The labor market remains very tight. Federal Reserve staff no longer predict that the U.S. economy will enter a recession. He emphasized that current policies are already restrictive, and interest rates should be maintained at a restrictive level for a considerable period of time. Future interest rate decisions will be made at successive meetings, and there will be no rate cuts this year. Several officials support multiple rate cuts next year. Regarding the September meeting, he believes that a decision should be made after seeing more data, and if the data is supportive, there may be another rate hike in September. Interest rate adjustments and balance sheet reduction are independent, and the Federal Reserve may reduce rates while reducing the balance sheet.

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Powell: No ruling out the possibility of a rate hike in September, no rate cuts this year, the Federal Reserve no longer predicts a recession in the United States.