CITIC SEC: Maintain the baseline judgment that the Federal Reserve will remain on hold at the September meeting and await data guidance.

CITIC SEC released a research report stating that Wash's speech at Jackson Hole focused on emphasizing the Federal Reserve's obligation and determination to combat inflation, which was more hawkish compared to his remarks at the July FOMC meeting. Market expectations for a rate hike in September have significantly increased, but based on the bank's forecast for U.S. inflation and economic growth trends, it maintains the baseline judgment that the Fed will stay put in September, with future inflation and employment data being crucial. The short-term markets warming expectations for a rate hike have supported the dollar, negatively impacting gold; however, the downward trend in long-term real interest rates continues to support the resilience of gold prices. The main points from CITIC SEC are as follows: Events: Federal Reserve Chairman Wash spoke on August 28 at the Jackson Hole meeting. The bank believes his speech was more hawkish than his remarks after the July FOMC meeting, but he also provided modest clarification on the core principles of monetary policy execution, indicating that the situation has not worsened. This was a prepared speech that may have undergone multiple reviews. The potential market impact of this speech should have been carefully considered by U.S. officials. Rather than releasing dovish signals, the choice of "temporary short-end interest rate increase" in exchange for "mid-term stability in long-end rates" is a more controllable option for U.S. officials to reduce market volatility. Given that Wash's speech and the recent expansion of the Treasury's debt buyback program both effectively limit long-end term premiums, the bank believes there are no short-term catalysts that can significantly raise U.S. Treasury term premiums. The hawkishness is reflected in two aspects: 1) He pointed out, Although the PCE and CPI readings this summer were better than expected, they do not tell me that underlying trends have meaningfully improved, emphasizing that inflation remains above the bank's 2% target, and we must be certain that underlying inflation is clearly and at sufficient speed moving towards our targetotherwise we have a lot of work to do. 2) He considered it difficult to describe the broad financial environment as restrictive. In contrast, at the June press conference, when asked if financial conditions were tightening, he shifted the question to various working groups. The clarification of monetary policy execution principles is reflected in three points: 1) Regarding market doubts about the Fed's future inflation targets, he indicated in his speech that "there should be no misunderstanding: the 2% price stability target measured by the personal consumption expenditures (PCE) price index is a steadfast fixed goal." 2) On the selection changes of inflation indicators, he notably focused on the proportion of components in the PCE exceeding 3%, which seems to be a more objective inflation indicator compared to his previous attempts at trimmed mean PCE. 3) After being vague about which tools the Fed should rely on to achieve its goals, he stated in this speech that short-term rates are the main tool for achieving our dual mandate, and clarified that higher inflation will require a higher federal funds rate to address this, emphasizing that the federal funds rate takes precedence over the balance sheet. This clarification of target principles is somewhat conducive to lowering term premiums and mitigating potential market volatility. Additionally, he used substantial portions of his speech to discuss the economy, which sounded more professional than previous statements; his response to the questioning of abandoning forward guidance did not offer much new explanation, and he did not commit to a clear reaction function. The bank maintains its baseline judgment that the Fed will stay put in September, with future inflation and employment data being crucial. Wash's speech at Jackson Hole primarily defended the Fed's obligation and determination to combat inflation and reiterated the Fed's dual mandate, being more hawkish compared to his remarks at the July FOMC meeting. Expectations for a rate hike in September have significantly increased; however, based on the bank's forecast for U.S. inflation and economic growth trends, it maintains the baseline judgment that the Fed will remain unchanged in September. Short-term market expectations for a rate hike have supported the dollar but negatively impacted gold, while the mid-term downward trend in long-term real interest rates continues to support the elasticity of gold prices. Risk factors: If unexpected escalations occur in the U.S.-Iran conflict or if long-term rates rise again due to inflation risk premiums, during the core "affordability" inflation topic of the U.S. midterm election, the risk of the Federal Reserve facing pressure to raise rates in advance to stabilize financial markets is increasing (although they may only symbolically raise rates once within the year); the job market is stronger than expected.