Recently, Fed Chairman Powell delivered an important speech on the current economic situation and monetary policy, signaling a dovish stance and providing a boost to the financial markets.

Powell reviewed the challenges faced during the economic recovery process after the pandemic in his speech. He pointed out that the economic restart has triggered the most severe inflationary pressures in nearly four decades, forcing the Fed to take a series of countermeasures. Initially, policymakers expected inflation to decline rapidly; however, developments diverged from expectations, leading the Fed to significantly raise interest rates, with a cumulative increase of 5.25 percentage points.

It is worth noting that despite the implementation of such aggressive tightening policies, the U.S. economy still shows considerable resilience. The inflation level is gradually approaching the target set by the central bank, and has not triggered significant fluctuations in the labor market, with the unemployment rate remaining relatively low. This phenomenon has prompted policymakers to reflect on the existing policy framework.

Powell announced that the Fed will abandon the previously adopted "compensatory strategy" and instead adopt a more flexible inflation target framework. This adjustment aims to enhance the adaptability and effectiveness of monetary policy to better respond to the complex and changing economic environment.

Regarding the revision of the monetary policy framework, Powell emphasized that the Fed will no longer overly focus on the concept of the effective lower bound (ELB). Instead, they will strive to create a comprehensive policy toolkit to ensure flexibility in addressing various potential economic situations.

This speech marks the Fed's shift towards a more flexible and pragmatic policy orientation. By adjusting its policy framework and communication strategies, the Fed hopes to achieve a better balance between sustaining economic growth and controlling inflation. The market generally believes that this shift in stance may signal a more moderate direction for future monetary policy, which will undoubtedly have a positive impact on the capital markets.

However, experts also remind investors that despite Powell's speech conveying positive signals, the global economy still faces many uncertainties. Investors should remain cautious when making decisions and closely monitor subsequent economic data and policy trends.