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Last Friday, officials from the three major central banks of the United States, Britain and Europe all said that they would enter a cycle of interest rate cuts in the coming months, or continue the previous pace of interest rate cuts. This marks that as the global economy gradually gets rid of the high inflation in the post-epidemic period, the era of high global borrowing costs is coming to an end, and the easing curtain of major central banks will also open a new chapter next month...

Federal Reserve Chairman Jerome Powell made it clear at the annual global central bank meeting held in Jackson Hole, Wyoming last Friday that the time has come for policy adjustments.The comments essentially capped the Fed’s historic anti-inflation campaign ahead of its next policy meeting on Sept. 17-18, when officials are widely expected to cut their benchmark federal funds rate.

In fact, Powell was not the only central bank governor who hinted at a steady decline in interest rates at the central bank's annual meeting.The European Central Bank and the Bank of England have also signaled that they are likely to take further action. Slightly different from the Federal Reserve, these two major European central banks have already cut interest rates once before.

Given that the start date of the Fed's interest rate cut has basically been determined and many major central banks around the world are working in the same direction, this has undoubtedly eliminated some of investors' concerns.After Powell and many other central bank officials spoke last Friday, both U.S. stock and bond markets rose, with the Dow Jones Industrial Average closing up 460 points. The 2-year U.S. Treasury yield, which is closely linked to the Fed's interest rate expectations, fell below the 3.9% mark.

Of course, huge uncertainties and risks remain. Neither Powell nor his peers have provided much guidance on how quickly they intend to cut rates in the coming months. Meanwhile, amid this uncertainty, weakness in the labor market and overall growth is replacing inflation as the main threat facing central bank policymakers.

In this regard, Federal Reserve Chairman Powell said last Friday thatThe way forward is clear, and the timing and pace of rate cuts will depend on incoming data, the changing outlook, and the balance of risks.He also said that from now on, he and his colleagues will take more signals from the labor market rather than inflation data.

Data from the interest rate swap market showed that traders are currently pricing in about 102 basis points of rate cuts from the Federal Reserve this year, which means that there will be rate cuts at the last three meetings of the year, including a large 50 basis point cut.

In addition to Powell, several officials from the European Central Bank's Governing Council also attended the central bank event last weekend and enjoyed the magnificent scenery of the Grand Teton National Park in the United States together.

ECB officials including Bank of Finland Governor Olli Rehn, Latvian Central Bank Governor Martins Kazaks, Croatian Central Bank Governor Boris Vujcic and Portuguese Central Bank Governor Mario Centeno have all said they would support another rate cut next month following a landmark reduction in June.

Rehn described the euro zone's inflation retreat as "on track", but warned that "Europe's growth prospects, especially in manufacturing, are quite subdued. This strengthens the case for a rate cut in September".

Centeno said it would be "easy" to make another rate cut in less than three weeks, given inflation and growth data.

Eurozone policymakers also appear more concerned about economic growth now, as the region’s growth has slowed after strong growth in the first half of the year. Although the ECB’s primary mandate does not include employment, they have also expressed concerns about labor market weakness and less about inflation.

ECB officials appear to have reached some consensus that the ECB will cut interest rates twice more this year (including the one in September) as long as inflation remains in line with the bank's forecast that eurozone inflation will fall within the central bank's 2% target in the second half of 2025.

In addition, Bank of England Governor Bailey also spoke at the Jackson Hole conference on Friday.In his speech, Bailey expressed cautious optimism that inflation expectations were better anchored and that second-round effects of inflation appeared smaller than expected, suggesting he was open to further rate cuts. The Bank of England just cut its benchmark lending rate by 25 basis points to 5% earlier this month, the first rate cut of the Bank of England in this cycle.

Elsewhere, major central banks such as Canada and New Zealand are also easing policy. The biggest exception may be Japan, where central bank officials launched their first tightening cycle in 17 years earlier this year.

The three-day Jackson Hole Global Central Bank Annual Meeting is essentially academic. At this year's annual meeting, economists also published four research papers, all related to the theme of "Reassessing the effectiveness and transmission of monetary policy."

Given the growing focus on jobs, research by University of Bern professor Pierpaolo Benigno and Brown University professor Gauti Eggertsson is perhaps most relevant to the current economic situation. They conclude that the cooling of the labor market is approaching an inflection point and that if the economy slows further, the U.S. unemployment rate could rise sharply.

Of course, not everyone is optimistic about the inflation outlook.In a panel discussion with Brazilian Central Bank President Roberto Campos Neto and Norwegian Central Bank Governor Ida Wolden Bache on Saturday, ECB Chief Economist Philip Lane said the ECB's battle to get inflation down to 2% has not yet been won, while Neto said tight labor markets make the task of curbing inflation challenging.