The Fed's interest rate cut expectations face a "big test", will Powell's speech become a turning point for the market?

The global financial market's attention is firmly focused on the Fed—expectations for interest rate cuts have recently been pushed to the forefront, and the next statement from Fed Chairman Powell may directly shatter the market's fantasy of a "50 basis point rate cut," bringing a critical test to the originally restless expectations.

Currently, the market is filled with uncertainty regarding the direction of monetary policy: on one side, there are fluctuating economic data, and on the other, investors have an urgent expectation for accommodative policies. Powell's speech at the Jackson Hole conference this Friday is seen as a "tough exam" during his term. This speech will not only release key signals regarding the magnitude and pace of interest rate cuts but may also reshape the entire market's judgment on the Fed's policy cycle.

It is worth noting that, in addition to short-term policy trends, personnel changes at the Fed also hide variables: reports say that the selection process for the Fed chair has quietly begun, with 11 candidates already on the list. This personnel shift is closely linked to policy formulation, as the differing philosophies of decision-makers may directly affect the direction and intensity of future interest rate adjustments.

Why is the market so tense? It is important to know that every policy shift by the Fed is like a stone thrown into the global financial market: fluctuations in U.S. stock prices, the volatility of U.S. Treasury yields, the strength of the dollar index, and even the trends of cryptocurrencies and commodities may all be stirred by this wave of expectation difference. If the expectation of a 50 basis point rate cut fails, those funds that bet on easing in advance may quickly adjust their positions, triggering short-term market fluctuations.

In the coming days, every word from Powell may be interpreted in an exaggerated manner. Will he continue the cautious hawkish stance, or will he release a more dovish signal? The answer to this "big test" may soon be revealed.