The "mouthpiece" of the Federal Reserve: from "three rate cuts" to "restarting rate hikes", Powell's first interest rate meeting faces unprecedented challenges.

Well-known journalist Nick Timiraos, often referred to as the "New Federal Reserve News Agency," wrote on Friday that Kevin Wash had only been in office as Federal Reserve Chairman for two weeks, but the bond market and White House had already arranged his first difficult battle after taking office. The strong non-farm payroll report on Friday prompted traders to increase their bets on rate hikes for the year, with a voting Federal Reserve official publicly warning that rate hikes may be needed this summer. At the same time, a major Wall Street bank predicted that the Federal Reserve will start a series of rate hikes starting in December. On the other hand, Trump reiterated his long-standing dissatisfaction: investors see strong economic data as negative because they expect the Federal Reserve to raise rates based on this. Trump posted on social media on Friday: "A very excellent job report has just been released. The stock market should rise instead of fall. Economic growth does not mean inflation!" On that day, U.S. stocks experienced selling pressure, with the Nasdaq index dropping more than 4%. Timiraos pointed out that in the current environment, positive economic data pushes up bond yields, which in turn depress stock prices. Trump's chief economic adviser argued on a television program on Friday that the jobs report actually indicates that the Fed may still cut rates in the future. Timiraos commented that the drastic market expectations highlight the huge challenges Wash faces before chairing his first interest rate meeting this month. When Trump nominated him in January, it seemed he was likely to take over a completely different economic situation. At that time, the market generally expected the Fed to cut rates by as much as three times within the year. Officials were unsure whether the labor market could hold steady without further policy support. With cooling labor demand and seeming inflation returning to Fed targets, interest rate levels seemed restrictive at the time. However, just four months later, the situation has almost completely reversed. Job growth has not only not slowed down, but has accelerated. The AI infrastructure construction boom is exacerbating supply shortages of raw materials and electricity, causing price pressures not from economic weakness, but from economic prosperity. This does not yet take into account the follow-up effects of Trump's decision to take military action against Iran in February. The long-term blockade of the Strait of Hormuz for most commercial shipping has pushed up gasoline and other commodities prices, and since the beginning of the year, U.S. gas station prices have risen nearly 50%. Internally, the Federal Reserve has long debated two major risks: whether to be more concerned about weak labor markets or rising inflation. Timiraos says that now, this debate is gradually leaning towards the "hawkish" side concerned about inflation, and these hawkish officials were already skeptical of rate cuts at the end of last year. White House Pressure Cleveland Fed President Loretta Mester is one of them, who voted against rate cuts at the April Fed meeting. At that time, she and two other officials argued that the Fed should remove wording in the official statement that implied rate cuts were more likely than rate hikes. The market generally expects the Fed to keep rates unchanged and remove the above wording at the June 16-17 meeting. Mester said in a statement on Friday that currently keeping rates unchanged is reasonable. "But if the recent trend continues, action may be needed soon." This statement implies that she is ready to push for rate hikes at the next interest rate meeting held at the end of July. The second voting member of the Federal Reserve, Dallas Fed President Robert Kaplan, stated earlier this week that if the current situation continues, she will support rate hikes later this year. Wall Street is also beginning to show a similar shift. French bank BNP Paribas on Friday became the first major bank to write rate hikes into its annual forecast, telling clients that it expects the Fed to start a series of rate hikes from December. Timiraos believes that if the market continues to discuss rate hikes this summer, mortgage rates and other borrowing costs may rise further, and the Republican Party is preparing for the midterm elections in November, needing to defend its performance in controlling living costs. In recent weeks, Trump administration officials have been trying to appease inflation anxiety, arguing that once hostilities in the Middle East end, energy cost increases will quickly fade away. White House National Economic Council Director Kevin Hassett said on Friday that current job growth is not the typical situation that needs to be suppressed by rate hikes. On the contrary, the Fed "will have room to cut rates while observing data." It is worth mentioning that Trump also said on Friday that he hopes to see rate cuts, but he will leave the decision on rates to Federal Reserve Chairman Wash. This article was reposted from "Finance Association" by author Niu Zhanlin; GMTEight editor: Wang Qiujia.