At this sensitive moment, Powell will take the stage again tonight; this is his first public statement since the Federal Reserve's decision.

At a time of intense turmoil in global markets, at 23:30 Beijing time tonight, Powell will speak at the Philadelphia National Association for Business Economics. This will be his first public appearance since last month’s FOMC meeting, and investors will be closely watching his remarks for clues on the direction of interest rate policy.

At its September meeting, the Federal Reserve cut rates by 25 basis points to a range of 4.00%-4.25%. The decision was almost unanimously approved, with only the new governor Stephen Miran dissenting, advocating for a 50 basis point cut.

However, Fed officials’ economic forecasts present a different picture: policymakers are almost evenly split into two camps—one believes further rate cuts are needed this year, while the other thinks the current policy stance is accommodative enough. This internal division increases uncertainty over the future path of policy.

This speech also faces the challenge of missing data brought by the government shutdown. The shutdown that began on October 1 has led to a suspension of key employment and inflation reports, depriving the Fed of important policy guidance. Investors are hoping Powell will explain how the Fed will set policy in the absence of key data.

Policy Signals at a Critical Juncture

The Fed’s dual mandate requires it to pursue maximum employment and price stability, but it currently faces competing concerns. Signs of cooling in the labor market indicate potential fragility on the employment front, while inflation has remained stubbornly above the central bank’s 2% target for nearly five years. This makes the rationale for aggressive rate cuts more complicated.

If Powell focuses on the labor market, investors will interpret it as leaving room for another one or two rate cuts before the end of the year. If he tends to emphasize the persistence of inflation, it means the threshold for further easing is higher and suggests the Fed may pause rate cuts at the policy meeting on October 28-29.

The timing of this speech is unusual, as there is not only a lack of new economic data but also a Fed blackout period ahead of the upcoming meeting this weekend. According to CME FedWatch, investors currently see as high as a 97% probability of another rate cut at the October meeting.

In the post-meeting press conference, Powell tried to maintain a neutral stance, stressing that future decisions would depend on upcoming data. But with the government shutdown causing key data to go missing, this position becomes increasingly difficult to maintain. The market will scrutinize his comments, looking for any hints as to which aspect of the dual mandate he is more concerned about.

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