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On Friday morning, local time in the United States, Federal Reserve Chairman Powell delivered a speech at the annual Jackson Hole Conference. What made the global market excited was that Powell bluntly said the words that everyone had been waiting for for a long time:Now is the time to adjust policy。

According to the schedule, the Federal Open Market Committee of the Federal Reserve will hold a policy meeting from September 17 to 18. Powell's latest remarks have confirmed that when Chinese stock investors wake up on Thursday (September 19) of that week, they will hear the news that the Federal Reserve will officially announce a rate cut.

Review: What did Powell say?

In his nearly 17-minute speech, Powell spent a lot of time describing the supply and demand relationship, the evolution of the labor market, and the policies and effects since the COVID-19 pandemic. In summary, it can be summarized into two points:1. Under his and other officials’ leadership, the Fed has been able to successfully handle this rare period of economic turmoil; 2. Now is the time to cut interest rates.

As the most exciting sentence for investors, Powell said in his speech: "Now is the time to adjust policy. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

In addition, Powell repeatedly emphasized his confidence in the continued slowdown in inflation and his vigilance against further cooling of the labor market.

In his speech he mentioned:

The balance of risks facing the Federal Reserve’s dual mandate (employment and inflation) has changed.Our goal is to restore price stability while maintaining a strong labor market.

I am becoming more and more confident, inflation is on a sustainable path back to 2%.

Today, the labor market has cooled significantly and is no longer as overheated as it was before...We do not seek or welcome a further cooling of labor market conditions。

With an appropriate reduction in policy restrictions, there is good reason to believe that the economy will return to 2 percent inflation while maintaining a strong labor market.

Inflation has fallen 4.5 percentage points from its peak in two years, while unemployment has remained low, a welcome and historically unusual result.

An important lesson from recent experience is thatWell-established inflation expectations, combined with strong central bank action, can bring about lower inflation without requiring an economic slowdown.

The Fed will launch a review of its policy framework later this year and will remain open to criticism and new ideas.

Positive market response

Although the market has already reached a consensus that the Federal Reserve will cut interest rates in September, after hearing Powell personally acknowledge the policy shift, all kinds of risky assets ushered in a celebratory rise - but the rise was not very fierce.

After Powell personally said "it's time to adjust policy", the three major U.S. stock indexes collectively rose by more than 1%.It is worth mentioning that as the initial excitement passed, this part of the increase saw a significant decline.

(S&P 500 minute chart, source: TradingView)

The reason behind this is not difficult to understand. As an earlier article by Cailianshe wrote: The Fed's interest rate cut was originally expected, and Powell did not mention on Friday how he planned to cut interest rates next.

That is why,Even after Powell's speech, the swap market's expectations for a September rate cut have not changed much, still remaining at 25 basis points, and the overall rate cut will remain at around 100 basis points before the end of the year.

(Source: CME Fed Watch Tool)

Given that there are only three interest rate meetings left this year, a 100 basis point rate cut would mean at least one meeting would cut rates by 50 basis points. At least for now, Powell has not expressed any intention in this regard.

After the September meeting, the Fed will hold its November meeting right before the US election, and will wrap up this year’s work on December 17-18. It is worth noting thatSeptember and December are the days when economic forecasts are released, including the "dot plot" and other economic outlooks of policy officials.。

Compared with the U.S. stock market, some stocks that benefited more directly from the Fed’s rate cuts have seen more stable gains.Spot gold has re-crossed the $2,500/ounce mark, international oil futures have risen by nearly 2%, and London copper has risen by 1.6%.These assets either benefit directly from interest rate cuts or from the recovery of demand in international markets.

Another asset that has attracted much attention is Bitcoin, an alternative investment target that once fell below the $50,000 mark earlier this month. After Powell's speech, it briefly rose above $62,000. The latest price before press time was $61,700, with a daily increase of $1,300.

(Bitcoin daily chart, source: TradingView)

In the foreign exchange market,The US dollar index fell below its low this year after the Fed chairman confirmed that interest rate cuts were imminentThe Japanese yen exchange rate, which has attracted much attention from global investors, broke through the 145 mark. The offshore RMB also rose by 200 basis points to 7.12.

(USD/offshore RMB daily chart, source: TradingView)

All in all, there is hope that the days of "the world suffering from the Federal Reserve for a long time" will finally come to an end. Although the next policy path has become much clearer, we still need to be prudent and "take one step at a time and wait and see."