In the speech delivered by Federal Reserve Chairman Powell, he mentioned that the probability and magnitude of interest rate cuts in 2026 are limited. The guidance indicates that the interest rate will be 3.4 by the end of 2026 and 3.1 by the end of 2027, while the current rate is between 3.5 and 3.75. This implies that the Federal Reserve believes there is only a small chance of a 0.25 interest rate cut in 2026 and about 0.5 percentage points of room for a cut in 2027.

However, the highlight of the speech is that starting tomorrow, the Federal Reserve will begin purchasing short-term U.S. Treasury bills, with an initial phase of $40 billion. It was also emphasized that the purchase scale will gradually increase to a higher level in the coming months before it is reduced. This suggests that short-term liquidity in U.S. dollars will be greatly alleviated in the next few months, keeping the interest rates in the short-term U.S. Treasury market at lower levels.