The latest interest rate meeting of the Federal Reserve remains "on hold", keeping the target range of the federal funds rate at 5.25% to 5.5% unchanged, but the information revealed by its chairman Powell suggests that the Fed's pace of interest rate cuts is getting closer. From the statement after the Federal Reserve's interest rate meeting, it can be seen that there have been some adjustments in wording compared to previous statements, such as changing inflation from "still high" to "slightly high" and changing "focus on inflation risk" to "focus on dual mission two-way risk". Cui Rong, Chief Analyst of Overseas Research at CITIC Securities, believes that the Federal Reserve's July 2024 interest rate meeting will continue to maintain interest rates unchanged, which is in line with market expectations. The statement of the interest rate meeting has undergone significant changes compared to the previous one, indicating increased confidence in the cooling of inflation. Powell's speech was generally neutral and dovish, with "overall," "normalization," and "balance" being the core words. Compared to his speech in June, which focused on controlling inflation, there was significantly more space on the job market in this speech, emphasizing the risk of balancing the economy and inflation. Robert Tipp, Chief Investment Strategist and Global Head of Bonds at PGIM Fixed Income, told China News Service reporters that the Federal Reserve has clearly weighed the interests of all parties, from "always prioritizing anti inflation" to balanced measures, and then paying attention to the downside risks in the current labor market. According to Cheng Shi's observation, Powell is satisfied with the current downward trend in inflation, but stated that the sustainability of the downward trend in inflation levels remains to be observed and further decline in inflation levels is needed. He also expressed concerns about the potential risk of labor market weakness. Cheng Shi, Chief Economist of ICBC International, stated that Powell's cautious attitude towards inflation risks has eased, pointing out that the United States has made some progress in inflation control and emphasizing the need to pay attention to the health of the labor market while focusing on the cooling of inflation. In terms of inflation, the June US Consumer Price Index (CPI) data further fell, but the labor market still provides some support for the price level of the service industry. The United States traded a higher unemployment rate (which had risen to 4.1% in June) for lower inflation (with a year-on-year CPI growth rate of 3% in June). Regarding the most concerning issue of interest rate cuts by the outside world, Powell stated at a press conference that the broad view among officials is that the US economy is "approaching a level suitable for interest rate cuts", and if more "desired data" can be seen in the future, the matter of interest rate cuts may be discussed at the September meeting. The Barclays research team stated that Powell hinted at a press conference that if inflation trends are generally in line with expectations, economic growth remains strong, and labor market conditions remain unchanged, a September rate cut may be put on the agenda. However, as expected, he cautiously did not commit to a rate cut, emphasizing that the Federal Open Market Committee would make decisions through successive meetings based on overall data, market outlook evolution, and risk balance. In Cheng Shi's view, whether to adjust the monetary policy stance, Powell's signal is to pay attention to future broad economic data, especially inflation and labor market performance. He analyzed that Powell stated in his response to reporters that as inflation cools down, the Federal Reserve's risk considerations on both sides of the dual targets of inflation and employment will be more balanced, and emphasized the need to be vigilant of the risk of a sharp decline in the labor market when looking back at history. Several Federal Reserve officials have recently expressed their concern about the labor market, believing that in addition to the inflation target itself, labor force participation rate and wage growth rate are currently the most critical indicators. The impact of geopolitical risks on the structure of the labor market will also affect the monetary policy stance of the Federal Reserve Board. Cheng Shi predicts that the Federal Reserve will start cutting interest rates as early as September 2024, with an expected rate cut of around 50 basis points for the year. If inflation recurs under the support of the labor market or the impact of geopolitical events, a rate cut channel may be opened in November. The pace of interest rate cuts by the Federal Reserve after the channel is opened depends more on the health of the labor market and the fiscal policy after the election. If the cumulative effect of high interest rates further exacerbates economic pressure, it may lead to more frequent interest rate cuts. (New Society)