At last year's Jackson Hole meeting, Powell unexpectedly hawkish remarks directly caused a 3% drop in the US stock market, leading to a large decline that day. In this meeting, Powell continued to maintain a hawkish stance, but there were also dovish comments. The market had already priced in a milder reaction compared to last year, and the three major indexes instead closed higher.
Overall, Powell's remarks this time are still similar to the previous interest rate decision. The path of future rate hikes depends on updated economic data. If inflation remains high and the economy remains strong, higher interest rates will be maintained.
Specifically, this meeting actually focused more on Powell's tone and resolute attitude. Powell stated that due to strong economic growth, there may be further rate hikes in the future, emphasizing the 2% inflation target. He pointed out that although overall inflation and core inflation have declined somewhat, core inflation remains high, and the challenge of stabilizing prices remains significant. The core commodity inflation has significantly decreased, while housing service inflation, despite a recent slight decrease, still lags behind the cooling of the real estate market, and non-housing service inflation has only moderately decreased. These remarks sound very hawkish, but they are consistent with the attitude of the Fed's previous meetings, so there are no surprises that could scare the market.
On the other hand, Powell admitted that real interest rates have reached restrictive level, and far above most neutral expectations,This sentence isvery dovish, the actual definition of real interest rates is the nominal interest rate minus inflation, the definition of neutral level is: at this interest rate level, the economy is at full capacity and inflation is stable...