Original title: "Powell made a big statement tonight, global market pays attention to three major suspense"

Original author: Zheng Yao, Jin Shi Data

Tonight, all eyes will be focused on Fed Chairman Powell. He will attend the Chicago Economic Club event and speak at 1:30 a.m. Beijing time on April 17. Investors, analysts and market participants around the world are waiting for Powell to respond to a series of recent economic developments.

Interestingly,Powell's speech was the venue where Trump visited in October 2024 and talked about high tariffs and the replacement of Fed chairman.Although the United States temporarily suspended tariffs on more than 75 countries around the world for 90 days, the overall economic outlook remains uncertain and market concerns about a U.S. recession is heating up.

Powell's speech today is bound to provide important clues on the current economic situation, the impact of tariffs and the 2025 interest rate trend. The market will focus on three suspense:

· In the face of Trump's tariff policy and the pressure of "changing coaches in the White House", how will the Federal Reserve stick to the tradition of independent decision-making?

· Will Powell's expectation of a rate cut change against the backdrop of a decline in inflation but an intensified recession risk?

· The "eagle and dove dispute" within the Federal Reserve is gradually becoming fierce. Will Waller and other officials' radical interest rate cut proposals affect decision-making?

In previous speeches,Powell said Trump's tariffs were far beyond the Fed's expectations and the impact on the economy may be greater than expected.Therefore, he believes that the recent policy impact is highly uncertain and a clearer situation will be awaited before further adjustments. He also emphasized that the current policy position is good and can adopt a wait-and-see attitude, and the policy is still moderately restrictive. As for whether the U.S. economy will experience an economic recession, he pointed out that the Federal Reserve has not made a probability prediction of the possibility of an economic recession, but external forecasting agencies have raised that possibility.In terms of rate cut expectations, Powell did not change his view at the March meeting, believing that weak economic growth and rising inflation offset each other will allow the Fed to maintain its expectations for two rate cuts in 2025.

Powell is facing pressure to "rate cuts" from many parties. Inflation in the United States seems to be gradually falling. The latest March CPI data shows that inflation has a further downward trend. At the same time, Trump has always supported low interest rate policies, and this position has caused trouble for Powell.If interest rate cuts are rapid and substantial, inflation may be triggered again; but if interest rate cuts are delayed, it may drag down the US economy.

Powell and most Fed officials still believe that this is not the right time to cut interest rates. Although the U.S. economy is beginning to show weakness, especially in the job market, the Fed seems to be inclined to maintain policy interest rates in case Trump's tariffs bring about a new round of inflation. Minutes of the Fed's March meeting show that its economic forecasts and dot charts suggest that there may be two rate cuts in 2025.

But Trump's tariff policy not only raises the risk of the United States falling into recession, but may also force the Fed to introduce more and more radical interest rate cuts. At the same time, the market performance remains sluggish, reflecting that previous expectations for the Fed's policy to turn looseness have not been transformed into a substantial rebound. Investors have chosen to wait and see and become cautious.

It is worth noting that just on Monday, US Treasury Secretary Bescent announced thatThe White House will begin interviewing candidates for the Federal Reserve Chairmanship to succeed Powell.Powell's current term will expire in May 2026, despite frequent political pressure from Trump, who repeatedly reiterated in public that he would complete his term. Wall Street rumors say,Fed governor Waller is expected to succeed as Fed chairman after Powell’s 2026 term ends, and his views this week are divided against some members of the Federal Open Market Committee (FOMC).

Waller said on Monday that if the U.S. president re-implements tariff measures announced on April 2, the Federal Reserve will have to quickly carry out a series of "bad news" rate cuts. Waller warned that if Trump imposes tariffs across the board after the moratorium ends, U.S. economic growth will "almost stagnate" and the unemployment rate will climb sharply from current 4.2% to 5% next year. He also pointed out thatWhile inflation may soar to 5% in the near term, the upward trend of price pressure may be temporary, which will open up space for the Fed to cut interest rates to hedge the impact of the slowdown.

"While I expect the inflationary effects caused by tariffs are only temporary, their negative impact on output and employment may be longer and become an important factor that must be considered when formulating monetary policy stances. If the economic slowdown is severe and even hits the brink of recession, I will tend to lower policy rates earlier and more significantly than previously expected."

Waller's judgment on rising unemployment is also consistent with the results of the New York Fed's consumer confidence survey released on Monday. The survey shows that 44% of Americans currently expect the unemployment rate to rise in the next year, the highest level since the pandemic, and that proportion has risen by 10 percentage points since Trump took office.

Other FOMC members advocate a "waiting and watching" attitude. They said interest rates will not be adjusted rashly until they see signs of actual slowdown in hard data. Powell currently holds the same view.

Since the beginning of 2025, the Fed has kept interest rates in the range of 4.25%-4.5%. The market currently expects the Fed to cut three interest rates in 2025, with the first time starting in June. According to the CME "Feder Watch Tool" on April 16,The probability of the Fed keeping interest rates unchanged in May is 81.4%, and the probability of a 25 basis point cut in June is 60.1%.

In addition, many investment banks have recently increased their expectations for the Fed's interest rate cut this year. The latest modification is Deutsche Bank. The bank now expects the Fed to cut interest rates by 25 basis points in December, which was previously expected to not cut interest rates in 2025. In addition, it is also expected that the Fed will cut interest rates twice in the first quarter of 2026 by 25 basis points, reducing the terminal interest rate to 3.5%-3.75%.