ChainCatcher news, Federal Reserve Chairman Powell stated in a speech that potential tariffs could have a lasting impact on inflation. The Federal Reserve is prepared to consider adjustments as needed. It is essential to ensure that price increases do not lead to sustained inflation.The impact of tariffs on the economy may be greater than expected. The Federal Reserve has an obligation to keep inflation expectations stable. Tariffs could elevate inflation in the coming quarters; sustained effects may also occur.

ChainCatcher news, Chicago Fed President and FOMC voting member Goolsbee warned that there are signs indicating that investors in the U.S. bond market are beginning to expect higher inflation, which would be a "significant danger signal" that could disrupt interest rate setters' plans for rate cuts.In the week prior to Goolsbee's remarks, a closely watched University of Michigan poll showed that U.S. households' long-term inflation expectations reached their highest level since 1993. Goolsbee stated, "If you see market-based long-term inflation expectations starting to change like the survey results from the past two months, I would consider that a significant danger signal that requires close attention." The five-year forward rate is currently at 2.2%, while the University of Michigan survey shows consumers expect a long-term inflation rate of 3.9%.Goolsbee indicated that if investors' expectations begin to align with those of U.S. households, the Fed will have to take action: "Almost regardless of the circumstances, you have to deal with this issue," he said.

ChainCatcher news, Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, stated in a report that the Federal Reserve is expected to keep interest rates unchanged at tonight's meeting, and Fed Chair Powell may reiterate that there is no rush to cut rates. It is anticipated that the Fed will lower its GDP forecast for 2025, raise its inflation forecast, and acknowledge increased uncertainty.The dot plot is expected to show that the median expectation for two rate cuts this year remains unchanged, with risks leaning towards one rate cut. The Fed is expected to cut rates once in June, and due to inflation accelerating again, there will be no further cuts in 2025.

ChainCatcher message, Federal Reserve Chairman Powell stated on Friday that the costs of currently adopting a cautious stance on monetary policy are "very, very low," but he also mentioned that these costs could rise if inflation expectations come under pressure. Although the standard reaction to one-time price increases caused by tariffs is to ignore them, this time may be different.Powell said, "If it (i.e., tariffs) turns into a series of events, and if the increases are larger, that will be important, and what really matters is what happens to long-term inflation expectations." Powell also pointed out that in 2019, the Federal Reserve had actually cut interest rates three times in response to the first tariffs imposed by the Trump administration and the economic slowdown that followed, "This is the result of these broad changes in economic policy, and not just tariffs."

ChainCatcher news, last week, the final value of the U.S. one-year inflation rate expectation for February recorded 4.3%, the highest since November 2023. Chicago Fed President Goolsbee downplayed this data result.In an interview on Sunday, Goolsbee stated that this number "is not good," but he added, "But this is just one month of data; we need at least two or three months of data to make it count."

ChainCatcher news, according to Jin10 reports, LBBW analysts stated in a report that the Federal Reserve will closely monitor to ensure that inflation expectations do not get out of control. This confirms the view of Deutsche Bank analysts that the Federal Reserve will not cut interest rates again before the end of this year. They stated, "Considering the inflation risks, if interest rates are really raised next time, the yields on U.S. long-term government bonds could soar."

ChainCatcher news, analyst Paul Ashworth said in a report that considering today's CPI report, the core PCE inflation indicator for September may accelerate from 0.1% in August to 0.2%, but the annualized rate "will only be slightly above the Fed's 2% target." PCE data will not be released until the end of the month, and in addition, tomorrow's PPI report will help adjust expectations. Ashworth stated that if his prediction is correct, the pace of inflation (decline) "will support the Fed's more cautious rate cut of 25 basis points early next month." (Jin Ten)

ChainCatcher news, the New York Fed's 1-year inflation expectation for July is 2.97%, previous value 3.02%. (Jin Ten)