Powell Press Conference:

Interest Rate Outlook: We can wait and see how the economy develops. Currently, we are at the upper end of the neutral range. There is no one currently considering a rate hike as the baseline expectation. Long-term interest rates may rise due to expectations of faster economic growth.

Inflation Outlook: Inflation risks are skewed to the upside. Peak inflation could be a few percentage points above or below the current level. The current inflation overshoot is mainly due to tariffs. If tariffs are removed, inflation will be at the lower end of the 2% range. The impact of tariffs is likely to be one-off.

Economic Outlook: We do not see the economy overheating; the baseline outlook for next year is steady growth. We can wait and observe how things develop.

Employment Outlook: There are downside risks in the labor market. Employment growth over the past few months has been overstated by 60,000 jobs. The unemployment rate could rise by another 0.1%-0.2% at most.

Quantitative Easing: Purchases of short-term Treasury bills are solely for reserve management. The scale of bond purchases may remain high in the coming months and then gradually decrease.

Latest Expectations: As of the time of writing, the futures market expects the Federal Reserve to cut interest rates by a total of 55 basis points next year, a slight increase compared to before, with a 24.4% chance of a 25 basis point cut in January.

Market Reaction: From the release of the Fed statement to Powell’s speech, gold and silver prices initially rose, then fell, and then climbed higher. Silver hit a historic high, U.S. Treasury yields fell by about 4 basis points, the dollar weakened overall, non-dollar currencies strengthened, U.S. stocks headed higher, with the Dow rising over 1%. Trump criticized Powell after the meeting, stating that the rate cut could have been larger.