Before the July Federal Reserve decision, Powell made two "important appearances", next week being the first one!

At the end of July, the Federal Reserve policy meeting is approaching, and the market still has little insight into the policy direction of the new chairman Kevin Warsh. During this window of time, Warsh will have at least two key public appearances, the first of which will be next week in Sintra, Portugal for the European Central Bank's annual symposium, and the second will be in mid-July for the semi-annual monetary policy testimony in Congress. Next week, Warsh will share the stage in Sintra with ECB President Lagarde, Bank of England Governor Andrew Bailey, and Bank of Canada Governor Tiff Macklem. This is his first public appearance outside the United States since taking office in May this year, marking his official debut on the global central bank stage as the Federal Reserve chairman. Previously, Warsh refused to provide any forward guidance at the press conference following the first monetary policy meeting, only saying, "The good news is that we will meet again in six weeks." The market is still in the dark about the policy response function. The emphasis on "price stability" triggered accelerated selling in equity and foreign exchange markets: the S&P 500 index fell by 1.2%, the euro fell by 0.9%, both the largest declines since various FOMC meetings this year. The USD spot index then rose by approximately 1% over the next two days, marking the largest increase in three months, and the interest rate futures market has priced in two rate hikes before the first quarter of 2027. With limited comments from Fed officials before the July 4th holiday, every word spoken at the Sintra forum will be closely watched by the market. Inflation in the United States has been above the Fed's target for five consecutive years, and the debate over the interest rate path remains unresolved. This appearance may become the most important window for the outside world to interpret Warsh's policy thinking. Global debut on stage: Standing alongside "veterans" of the 2008 financial crisis The trip to Sintra is Warsh's first international public appearance since taking office. The four central bank leaders who will be on the same stage at this symposium all experienced the 2008 global financial crisis. Lagarde was the French Finance Minister at the time, Bailey was involved in organizing bank rescues as a Bank of England official, Macklem represented the Canadian finance ministry at G7 and Financial Stability Board meetings. Warsh himself was a Federal Reserve governor during the massive government capital injection into nine major banks in 2008. Simona Delle Chiaie, Chief Eurozone Economist at Bloomberg, pointed out that "with Warsh's first public appearance as the Federal Reserve chairman, alongside Lagarde, Bailey, and Macklem, the discussion is likely to go beyond inflation itself, focusing on how central banks can innovate in the face of geopolitical uncertainties and financial stability risks related to artificial intelligence." Last year in Sintra, Warsh's predecessor Jerome Powell received standing ovations and praises from attendees for standing his ground against pressure from President Trump. Warsh's debut this time faces a completely different atmosphere on stage. Uncertain policy direction: Lack of forward guidance, two paths coexisting Last week, Warsh chaired his first monetary policy meeting since taking office, and explicitly stated at the subsequent press conference that he could not provide forward guidance. "I can't provide any forward guidance on the next steps," he said. "The good news is that we will meet again in six weeks." This statement has pushed all questions from the outside world to the next meeting. This makes it even more difficult for the outside world to understand his policy orientation. Current inflation has been above the Fed's target for five consecutive years, but there is still disagreement in the market on how much of the recent inflation spike is due to one-off factors such as tariffs and the closure of the Strait of Hormuz. Tim Duy and Josh Lehner of SGH Macro Advisers wrote in a report: "Given the uncertainty of Warsh's reaction function, we provide two potential interest rate paths in our updated probability forecasts." Axios also pointed out that predicting the Fed's next move has become a puzzle in trying to figure out the tactics of a new chairman. Strong employment data: Expectations of rate hikes may further heat up During the Sintra forum, the United States will also release a series of heavyweight data this week, which may further influence market judgments on the interest rate path. The June non-farm payrolls report is expected to be released on Thursday, with economists predicting an increase of 115,000 jobs. If this comes true, it will be the best performance for job growth in the last six months. Wage growth is expected to pick up, and the unemployment rate is expected to remain stable. The combination of the above data almost certainly will further consolidate market bets on the Fed raising interest rates instead of cutting them. In addition, reports on job openings, ADP private sector employment data, and the ISM Purchasing Managers Index for manufacturing will also be released, providing more evidence for assessing economic momentum. Financial stability risks: AI overheating and market hazards become important topics Financial stability risks are also one of the core topics of the Sintra forum. According to Bloomberg, Macklem recently warned that "excessive investment in the United States is setting the stage for a painful adjustment"; the European Central Bank also issued a similar warning in its semi-annual assessment report about market volatility risks, especially focusing on asset overheating caused by the AI boom. The four central bank leaders who experienced the 2008 financial crisis will discuss these topics at the Sintra forum, and how to balance innovation with systemic risk prevention in the face of geopolitical uncertainties and the new landscape of financial stability risks related to AI is expected to be an important agenda for this meeting. For investors, Warsh's statements and interactions in this context will provide richer policy clues than just interest rate signals. This article is reproduced from "Wall Street News", GMTEight Editor: Chen Siyu.