Federal Reserve officials signal: monetary policy remains tight, and the impact of tariffs will gradually diminish next year

【Crypto】The recent speech by Federal Reserve Chair Powell has sent several important signals to the market.

What is her core concern? The labor market. In her own words: “My concerns about a softening labor market still slightly outweigh the risks of inflation rising.” In other words, the pressure on employment keeps her more awake than the inflation risks.

But this doesn’t mean she will rush to cut rates further. Powell emphasized that the current monetary policy remains somewhat restrictive. This is key — she is hinting that the existing interest rate levels, combined with the cumulative effects of past tightening policies, should be sufficient to help inflation gradually return to the 2% target.

Why is she relatively optimistic about inflation prospects next year? Mainly because the impact of tariffs will gradually diminish. Her logic is: over time, the upward effect of tariffs will fade, and inflation is very likely to gradually decline.

Looking back, the Federal Reserve has already cut rates by a total of 75 basis points. Powell described this as “insurance against further deterioration of the labor market.” As for the labor market itself, she used a vivid metaphor: “It’s bending but not broken.” In other words, the situation is worsening but hasn’t reached a critical point.

It’s worth noting that she did not provide explicit forward guidance in her speech. However, she revealed that the situation will become clearer early next year, when she will become a voting member of the FOMC and will be able to make more definitive judgments with additional information.