Federal Reserve's latest monetary policy report: The overall economic situation in the United States is good, and Trump's policies are a key variable

According to the Zhitong Finance APP, the Federal Reserve released its latest "Monetary Policy Report" on Friday, expressing an optimistic view on the state of the U.S. economy while warning of some potential risks in the financial system.

The report emphasizes that Federal Reserve officials remain committed to restoring the inflation rate to the 2% target and noted that when adjusting interest rate policies, officials will "carefully assess the latest data, changes in the economic outlook, and risk balance."

The report states that the overall economic condition in the U.S. is good, the job market is robust and approaching balance, and inflationary pressures have eased. Additionally, the Federal Reserve indicated that the U.S. financial system is "overall healthy and resilient." However, the report also pointed out that asset valuations in several markets, including stocks, corporate debt, and residential real estate, remain above fundamentals.

The report further warns that "valuation pressures have risen further from already high levels" and specifically highlights that "vulnerabilities related to financial leverage remain significant."

Despite this, the report does not suggest that the financial system poses a broad threat to the economy. On the contrary, the Federal Reserve believes that medium and large enterprises, most households, and local governments still have access to credit. However, for small businesses and borrowers with poor credit histories, the credit environment remains "relatively tight."

The report shows that in terms of overall borrowing levels, the total debt levels of households and non-financial enterprises "continue to decline and are at relatively low levels compared to the past 20 years." This trend indicates that despite higher interest rates, the U.S. economy remains stable in terms of credit supply.

This report is a routine document released by the Federal Reserve twice a year, based on data up to Thursday, and summarizes economic dynamics that market participants and Federal Reserve observers are already familiar with.

At the time of the report's release, the Federal Reserve is facing a highly uncertain policy environment, primarily due to the large-scale policy adjustments being implemented or considered by U.S. President Trump.

With inflationary pressures easing, the Federal Reserve successfully lowered the interest rate target by a full percentage point last year. However, whether further rate cuts will occur remains uncertain, especially as the Trump administration's trade and labor policies could push inflation higher, while current inflation levels are still above the Federal Reserve's target. Some Federal Reserve officials have even pointed to the uncertainty of government policies, believing that it limits the Federal Reserve's ability to provide clearer forward guidance on monetary policy.

Regarding trade policy, the report did not provide detailed comments but mentioned that "some market participants pointed out that expectations of potential increases in U.S. import tariffs are one of the factors driving the recent strength of the dollar."

The report also addressed the potential economic impact of artificial intelligence (AI) technology. The Federal Reserve stated that the current boost of AI to productivity is still relatively limited, but its impact "may gradually increase with the widespread application of AI technology." The enhancement of productivity growth helps the U.S. economy achieve faster growth without triggering inflationary pressures.

Although this report does not provide much specific guidance on the outlook for monetary policy, it acknowledges that the current federal funds rate target range of 4.25%-4.50% is consistent with the levels suggested by policy rules