Summary of the January Federal Reserve Meeting

Overall, the reporters' gossip questions were more numerous than the current inflation issues, but Powell was clearly unwilling to answer any gossip questions, including whether he would continue to serve as a governor after resigning as Federal Reserve Chairman. This was the first time I heard him not answer the first five questions during a Q&A session, even including a question from Nick.

In other questions, the main focus was on whether we would enter a rate-cutting phase next. In my opinion, Powell's responses were quite dovish, with almost no hawkish statements. When a reporter asked if he would consider raising rates if the labor market remained unchanged but inflation continued to rise, Powell's answer was still that it was not currently under discussion. This question comes up almost every time, and Powell's response is always the same.

Although he did not explicitly express the future rate adjustment path, Powell did not directly deny the possibility of a rate cut next time, as he did in the last two meetings. Instead, he said they would decide based on the data, which is a dovish response. He also indicated that if the labor market declines, the Federal Reserve would consider rate cuts more seriously. He believes that the decline in the labor market is closely related to immigration policy.

In this meeting, I personally felt that Powell was subtly criticizing Trump. First, he pointed out that the risk of declining labor data could lead to an economic downturn, primarily due to immigration, which everyone knows is one of the most forceful policies since Trump took office, aside from tariffs.

Secondly, he suggested that without tariffs, the Federal Reserve would have already entered a comprehensive rate-cutting phase. It is the tariffs that have led to a new round of inflation increases. Without tariffs, current inflation would be very close to 2%. Of course, Powell also believes that if there are no further issues with tariffs, we might see the peak impact of tariffs on inflation by mid-2026, meaning inflation should start to decline.

There wasn't much else to discuss. Powell remains very rational, and his statements are within the expected template, still aiming to maintain 2% inflation without wavering, determining the next rate adjustment based on data, and not making any predictions. However, Powell did briefly mention advice regarding the selection of his successor as Federal Reserve Chairman, which is to avoid involvement in elections and politics, maintaining the independence of the Federal Reserve.

Overall, this meeting had little impact on the market.

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