The Federal Reserve does not need to wait for inflation to drop below 2% before cutting interest rates. When it comes to the issue of rate cuts, there is no specific inflation target in mind.
2. Balance sheet:
More efforts are needed for balance sheet reduction. The Federal Reserve does not have a specific target in terms of balance sheet size, they will find an appropriate level based on experience.
3. Inflation:
There is not enough confidence that inflation is sustainably falling towards the 2% target. All inflation expectations are around 2%.
4. Capital regime:
Regulatory authorities are close to reaching a consensus on capital regime reform. The Federal Reserve is prepared to advance adjustments to the capital regime, waiting for consensus to be reached. At some point this year, the Federal Reserve will move forward with liquidity proposals.
5. Federal Reserve Independence:
When the FOMC sets policy rates, they do not take into account many political factors. Since 2022, I have not had any calls or meetings with President Biden.
6. Market response:
During Powell's speech, the U.S. 10-year Treasury bond yield briefly rose above 4.3%, and the 2-year U.S. bond yield briefly rose above 4.63%; spot gold briefly rose above $2380 per ounce, leading to a daily gain of about 0.5%; the ICE dollar index remained in decline, briefly dropping to a daily low of 104.996 points after Powell's Q&A session; the S&P 500 index fluctuated higher, reaching a daily high of above 5616 points after Powell's speech, with a daily gain of over 0.7%.
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