According to Xinhua Finance, Federal Reserve Chairman Jerome Powell delivered a speech at the annual economic symposium held in Jackson Hole, Wyoming on August 22, suggesting that despite current upward inflation risks in the United States, the Fed may still cut interest rates in the coming months.

Senior analyst Bai Xue from Orient Securities Credit Research and Development Department stated in an interview that Powell's speech centered around employment market risks and policy framework adjustments, releasing clear "dovish" signals and opening a policy window for Fed rate cuts in September.

Powell indicated that short-term U.S. inflation risks are tilted to the upside, while downside risks to U.S. employment are rising. Based on changes in economic outlook and risk balance, the Fed's monetary policy stance may need adjustment.

"Employment market risks have become the key trigger point for Fed policy adjustments," Bai Xue analyzed. Powell systematically elaborated for the first time on the "peculiar balance" of the U.S. job market - simultaneous slowdown on both supply and demand sides, leading to seemingly stable unemployment rates but significant accumulation of downside risks. He specifically pointed out that July's non-farm payrolls added only 73,000 jobs, far below the expected 115,000, with previous figures being substantially revised down by 258,000. This abnormal phenomenon could rapidly evolve into layoff waves and unemployment rate spikes. This emphasis on the "boiling frog" risk in the employment market forms a sharp contrast with his remarks at the 2024 Jackson Hole meeting, when Powell was more concerned about inflation stickiness. Therefore, the sudden increase in employment market downside risks has brought about a "shift in risk balance," meaning the Fed will pay more attention to employment market risks and prepare to implement rate cuts in response.

The latest employment data shows significant cooling in the U.S. job market. Data released by the U.S. Department of Labor on August 1 showed that the U.S. unemployment rate rose 0.1 percentage point month-over-month to 4.2% in July, while non-farm payrolls added 73,000 jobs that month, significantly below market expectations. Meanwhile, non-farm job additions for May and June were also substantially revised down from 144,000 and 147,000 to just 19,000 and 14,000 respectively.

Senior investment advisor Yu Xiaoming from Shaanxi Jufeng Investment Information Co., Ltd. stated in an interview that Powell's attitude shift represents a reasonable adjustment by the Fed based on economic data, and also includes policy framework corrections. Rising downside risks in the U.S. job market, with average non-farm job additions over the past three months declining sharply and weakening upward inflation risks, provide data support for the Fed's policy pivot.

The Fed's published schedule shows that the Fed will announce the results of its September monetary policy meeting on September 17, local time.

"Powell's speech means that recent employment data cooling beyond expectations has accelerated the Fed's consensus on policy adjustments, making a September rate cut almost a foregone conclusion," Bai Xue analyzed. Regarding the magnitude of rate cuts, 25 basis points may be the only option. The current U.S. federal funds rate is in the restrictive range of 4.25% to 4.5%. A 25 basis point cut would both release an easing signal without triggering market concerns about policy disorder.

However, before the Fed's September monetary policy meeting, U.S. August employment data and CPI (Consumer Price Index) will be released first. Bai Xue believes attention should still be paid to uncertainties in U.S. August employment data and CPI figures. If August U.S. non-farm payroll data rebounds to above 150,000 or core CPI breaks through 3.2%, it could also force the Fed to delay action. Additionally, there are still divisions within the Fed, though considering Powell has clearly prioritized employment risks in his speech, such divisions are more likely to be reflected in the pace rather than direction of rate cuts.

Yu Xiaoming analyzed that if the Fed cuts rates in September, it will impact global markets across multiple dimensions. For equity markets, dollar weakness may drive capital flows toward emerging markets, boosting global risk appetite, with interest rate-sensitive real estate and financial sectors expected to benefit. For exchange rates, the dollar will likely depreciate, with non-dollar currencies expected to strengthen.

"For global markets, the Fed's pivot means a reshaping of cross-border capital flow patterns, and emerging market assets may welcome opportunities for phased revaluation," Bai Xue also stated. The September rate cut could become the starting point for the Fed to restart accommodative policy. If the U.S. core PCE (Personal Consumption Expenditure) price index falls below 2.8% in October, the Fed may cut rates again at subsequent monetary policy meetings, with 2 to 3 rate cuts within the year, totaling 50 to 75 basis points.