Recently, Stanford University President Jonathan Levin shared his insights on Fed Chairman Powell's speech at the Jackson Hole Global Central Bank Annual Conference. Levin believes that the market's dovish interpretation of Powell's remarks may be somewhat overly optimistic.

Powell's speech has triggered a strong reaction in the financial markets, with U.S. stocks hitting new highs in response. Investors generally believe this indicates a possible rate cut in September. However, Levin pointed out in his latest comments that a careful analysis of Powell's speech reveals that the core message is not an unconditional easing of monetary policy, but rather a cautious weighing of the dual risks of a weak labor market and high inflation in the current complex economic environment.

Levin emphasized that the market's euphoria seems to overlook the key details in Powell's speech. He pointed out that if the Fed really decides to cut interest rates, it is likely due to serious problems facing the economy that force the Central Bank to take action, rather than simply because of cooling inflation. This deeper implication was overlooked in the market's initial reaction.

In addition, Levin also mentioned that Powell admitted that decision-makers are facing a difficult task: seeking a balance between promoting full employment and maintaining price stability. This policy dilemma means that the future path of interest rate cuts may be slower and more uncertain than the market expects.

Levin reviewed the situation when the inflation rate soared to 9.1% in 2022, when the Fed's goals were very clear and consensus on policy-making was relatively easy to achieve. However, the current economic environment is much more complex, significantly increasing the difficulty of decision-making.

Overall, Levin's analysis reminds investors and market participants not to overinterpret Powell's speech; the Fed's policy direction still has many variables. In the current economic environment, the Fed needs to carefully balance multiple objectives, and the future monetary policy path may be more complex than the market expects.