Powell's recent speech injected a dose of confidence into the financial markets, and the dovish tendencies revealed in his remarks triggered a positive reaction from the market. In this important speech, Powell comprehensively reviewed the recent economic challenges and policy responses in the United States.

He first pointed out that the economic recovery in the post-pandemic era has triggered the most severe inflationary pressures in nearly forty years. The Federal Reserve initially expected inflation to fall rapidly, but this judgment proved to be overly optimistic. In response to persistently high inflation, the Federal Reserve had to adopt an aggressive interest rate hike strategy, raising rates by an astonishing 5.25 percentage points.

It is worth noting that despite the implementation of such a tough tightening policy, the U.S. economy has shown unexpected resilience. While inflation gradually approaches the target level, the unemployment rate has not seen a significant rise, which breaks the expectations of traditional economics.

In terms of the policy framework, Powell announced a significant adjustment. The Federal Reserve has abandoned the previously controversial "compensatory strategy" in favor of a more flexible inflation targeting framework. This change means that the central bank will be able to respond more flexibly to inflation fluctuations in different economic environments.

In addition, Powell emphasized another important revision to the monetary policy framework. The Federal Reserve no longer overly emphasizes the concept of the effective lower bound (ELB), but instead focuses on how to make monetary policy better suited to various economic conditions. This adjustment indicates that the Federal Reserve is preparing for potentially complex economic environments in the future.

Powell's remarks not only reflect the Federal Reserve's cautious assessment of the current economic situation but also demonstrate its forward-thinking approach in policy-making. The market generally believes that these statements lay the groundwork for potential interest rate cuts in the future, which is undoubtedly a signal that investors have long awaited.