The message that Federal Reserve Chairman Powell needs to convey this week must be strong enough to appease investors anxious about market volatility, while avoiding excessive market interpretation of policy positions. He needs to indicate that the economy remains robust, but the Federal Reserve is willing to adjust interest rates if necessary.

The labor market remains strong, but once it deteriorates, the Federal Reserve will not stand idly by; Although there are signs of a slowdown in inflation, it has not fully reached the target and cannot easily commit to a path of interest rate cuts.

Powell needs to imply that the Federal Reserve closely monitors market volatility, but will not change policy direction just because of stock market adjustments. "- Dominic Konstam, Head of Macro Strategy at Mizuho Securities USA

Market expectation: The Federal Reserve will initiate interest rate cuts in June, with three cuts within the year

Although Federal Reserve officials have not yet explicitly supported a rate cut, the market has formed strong expectations: the March 18-19 meeting will keep interest rates unchanged, but June may become the window for the first rate cut;

Traders expect the Federal Reserve to cut interest rates three times by 2025, while economists generally expect two; If the policy guidance only implies two interest rate cuts, the market will focus on Powell's flexibility in future policy adjustments.

The market has already digested the expectation that the Federal Reserve will cut interest rates three times, but if the official expectation is only two times, Powell must emphasize the Fed's flexibility, otherwise it may trigger market volatility. "- James Athey, portfolio manager at Marlborough Investment Management

Despite the slowdown in consumer price growth, core inflation remains high, which limits the Federal Reserve's room for interest rate cuts. "- Matthew Luzzetti, Chief Economist of Deutsche Bank in the United States

Economic data and inflation trends: interest rate cuts still need to be observed in the labor market

Despite the easing of inflation, multiple key data still limit the Federal Reserve's policy adjustments:

Core inflation remains high, and long-term inflation expectations continue to rise;

The labor market has not yet shown significant weakness, and the unemployment rate remains at a historical low;

The number of layoffs in enterprises has not significantly increased, and salary growth remains relatively stable.

The Federal Reserve may need to see more obvious signs of economic slowdown, such as rising unemployment rates and weakened job growth, before initiating interest rate cuts.

If signs of economic slowdown are limited to market volatility, the Federal Reserve will not rush to adjust policy. "- Sarah House, Senior Economist at Wells Fargo

The Trump administration's trade policies, fiscal stimulus, and deregulation measures may affect the Federal Reserve's policy considerations

Potential economic stimulus: If the government introduces new tax breaks and fiscal spending, it may drive short-term growth and make the Federal Reserve more cautious in cutting interest rates;

Trade tensions: New tariff policies may suppress corporate investment, leading to market volatility, and the Federal Reserve may need to take countermeasures.

The policy direction of the Trump administration is still unclear, and the Federal Reserve must wait for clearer signals before making a decision. "- Chief Strategist of BNP Paribas

The market is still watching whether the Federal Reserve will slow down the pace of its balance sheet reduction (QT): January meeting minutes show that officials discussed the possibility of suspending QT to avoid financial market turbulence;

If the debt ceiling negotiations in Congress fail to reach a consensus, the Federal Reserve may consider suspending QT to ensure sufficient market liquidity.

The Federal Reserve has hinted at the possibility of adjusting the QT pace, so this week may be the right time. "- Blake Gwin, Head of US Interest Rate Strategy at RBC Capital Markets

Market Focus This Week

Federal Reserve Economic Forecast Update - Focus on whether the 2025 GDP growth, inflation, and unemployment rate forecasts will be adjusted;

Powell's speech - observing the Federal Reserve's statements on the timing of interest rate cuts and policy flexibility;

Market response - Pay attention to changes in US bond yields, equity assets, and the US dollar index.