Powell's latest speech in-depth analysis: a "neutral" interest rate cut, returning decision-making power to data, are all old tricks! Core judgment: This interest rate cut is a combination of "dovish action+hawkish outlook", and in the short term, the Federal Reserve has kicked the ball of the policy path back to economic data. 1、 The 'neutral trap' of interest rate cuts: completion of phased tasks The Federal Open Market Committee (FOMC) has decided to lower the target range for the federal funds rate by 25 basis points to $3.50% -3.75%. This may seem like a traditional loosening move, but Powell's wording at the press conference gave it a new meaning: Returning to neutrality: Powell emphasized that after three interest rate cuts, the current policy rate is within the "reasonable estimate range of neutral rate". The policy has withdrawn from the region of 'restricted economy'. This means that the Federal Reserve believes it has completed the correction of the previous "excessive tightening of inflation prevention". Unless there is a significant change in economic conditions, the door to consecutive significant interest rate cuts in the short term is basically closed. The wait-and-see signal is clear: new wording has been added to the statement, stating that the data, outlook, and risk balance will be carefully evaluated. This is the classic 'wait and see/pause' signal. The Federal Reserve is now in a 'very good position to wait and see', and the actions of the next meeting will depend entirely on the upcoming employment and inflation data. 2、 The transformation of risk balance: from "anti inflation" to "employment protection" Powell clearly pointed out that the current risk balance has shifted, that is, "inflation risk tends to be higher and employment risk tends to be lower in the short term". This marks a subtle shift in the focus of the Federal Reserve's strategy: Employment becomes a new focus: With the unemployment rate slightly rising to 4.4%, the Federal Reserve's vigilance towards the downside risks in the labor market has significantly increased. In the current equilibrium, the Federal Reserve's fear of a job collapse (with the unemployment rate rising to 5%) outweighs its concern about short-term inflationary pressures. Tolerance for tariff type inflation: Powell sees the price of goods pushed up by tariffs as a "one-time upward shift in price levels" rather than a sustained inflation process. This statement is of great significance: it leaves room for the Federal Reserve to maintain a dovish stance in the coming months when "inflation data is ugly but employment continues to weaken". 3、 Economic Outlook and Policy Prospects: Dot Matrix Locks Loose Space The latest economic forecast (SEP) from the Federal Reserve depicts a picture of a 'soft landing V2.0', but the distribution of the dot plot sets clear boundaries for future easing space, with the dot plot showing an expectation of one interest rate cut next year. Strong economic resilience: The GDP forecast for 2026 has been raised, citing strong consumer resilience and investment in AI/data centers. Slow return of inflation: Although the core PCE remains at 2.8%, it is expected to slowly approach 2% in the next two years. Dot matrix suppresses bull market fantasies: Median display: The median federal funds rate is approximately $3.4% in 2026 and $3.1% in 2027, which is only slightly lower than the current rate. This is not a 'significantly loose' channel, but a 'small, slow' adjustment path. The dot matrix clearly limits the room for interest rate cuts, indicating that the Federal Reserve is unwilling to provide unlimited expectations of interest rate cuts to the market, effectively suppressing the "bull market fantasy" in the long-term bond market. Serious divergence: The highly dispersed dot matrix pattern (some believe it should not be lowered this year, while others believe it will be lowered several more times in the future) also reflects the lack of consensus among the committee on the future path. 4、 Strategy Summary: Internal Divergence and Increased Data Volatility The essence of this meeting of the Federal Reserve is to complete the correction of the previous excessive tightening policy and bring interest rates back to near neutrality. They are currently in a state of 'fine control and risk hedging'. Decision dilemma: The decision was passed with 9 votes in favor and 3 votes against. This internal divergence, combined with highly dispersed dot patterns, means that the committee finds it difficult to reach a unified direction. Market impact: This divergence and "neutral+wait-and-see" stance have actually laid the groundwork for subsequent "data-driven volatility". Even if only one or two sets of key data (employment or inflation) exceed expectations in the future, the market's expectations for the next meeting will fluctuate sharply. In summary: After completing the 'pullback', the Federal Reserve has fully handed over the choice of policy path to future data performance. For the market, short-term risk assets (such as US stocks) breathe a sigh of relief, but the medium-term trend will depend entirely on whether the unemployment rate continues to rise and whether inflation can overcome shocks such as tariffs and continue to decline.