CICC: It is not appropriate to overinterpret Powell's "dovish"ness.

The report from China International Capital Corporation (CICC) stated that Federal Reserve Chairman Powell's speech at the Jackson Hole meeting was seen by the market as a "dovish" signal of monetary easing. However, we believe that Powell's remarks did not provide a strong indication of the duration and magnitude of interest rate cuts, but rather clarified the Fed's policy "reaction function" - that is, when the risks to employment outweigh inflation, the Fed tends to lower interest rates. However, under significantly higher tariff rates and tighter immigration policies, risks to employment and inflation coexist. If inflation risks surpass employment risks, Powell can still use the same "reaction function" to halt interest rate cuts. Therefore, the market should not view Powell's speech as the start of a series of easing measures, but should recognize the challenges faced by monetary policy when there is a conflict between employment and inflation targets. If tariffs and immigration policies further intensify "stagflation" pressures, putting the Fed in a dilemma, there will not be a truly meaningful monetary easing. Market risk appetite may decline and volatility may increase accordingly.