At 00:20 this morning, Federal Reserve Chairman Powell delivered remarks at the National Association for Business Economics (NABE) annual conference, sending multiple policy signals that triggered significant volatility across global financial markets. According to the CME FedWatch tool, the probability of the Fed maintaining rates unchanged in October stands at 2.7%, while the likelihood of a 25 basis point cut is 97.3%. For December, the probability of unchanged rates is just 0.1%, with a 6.4% chance of a cumulative 25 basis point reduction and a 93.5% probability of a cumulative 50 basis point cut.

The precious metals market responded enthusiastically to these developments. As of today's opening, the Shanghai Gold Au2512 contract has essentially recovered yesterday's long upper shadow, demonstrating strong market approval of the dovish signals.

Powell's address highlighted several key areas of focus:

First, regarding employment data, the overall situation appears genuinely concerning. Previously released non-farm payroll figures showed weakness, falling short of market expectations, while the unemployment rate climbed to a yearly high of 4.3%. This aligns with private sector "mini non-farm" (ADP) data, creating mutual confirmation. ADP figures have consistently weakened over the past three months: August's job additions fell below market expectations, and September not only missed targets but showed rare negative growth, with actual job reductions. This accumulation of weak data points to the same signal: mounting pressure in the U.S. employment market. Powell's speech last night explicitly acknowledged this development, emphasizing rising employment risks.

Another significant shift concerns statements about halting balance sheet reduction. Powell clearly signaled that the Fed "may stop balance sheet reduction in the coming months," marking a potential conclusion to three years of monetary tightening policy. Simply put, the Fed has spent the past three years "draining liquidity" by ceasing bond purchases or selling Treasury securities to withdraw dollars from the market, aiming to tighten liquidity and suppress inflation. While March and June saw two instances of slowing the reduction pace, passive contraction continued throughout. However, this statement represents the first clear intention to "turn off the drain" in nearly three years. This move would both prevent further liquidity tightening and create a more accommodative monetary environment for future rate cuts, signaling the Fed's policy focus may shift from "singular focus on inflation" to a new phase of "balancing growth and employment."

Nevertheless, attention must be paid to Powell's reiterated inflation concerns, particularly his mention that tariffs are driving price pressures higher. He explicitly noted that price increases primarily reflect tariff impacts rather than broad-based inflationary pressure. Therefore, future trade conflict developments between nations, especially involving the United States, require close monitoring. If friction persists and the U.S. continues wielding the tariff weapon, this could potentially constrain the pace of rate cuts.

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