Thank you everyone. It's great to be back here and see so many familiar faces. I've been looking forward to this weekend—where better to commemorate my 100th day as Chairman of the Federal Reserve? We all want to thank Kansas City Federal Reserve Bank President Jeff Schmid and his team for their hospitality. Jeff, thank you all. Jeff and the other event organizers have arranged some leisure activities for later today. I suggest you choose carefully. Years ago, I realized that the hiking trails around Jackson Hole come in two styles. My experience hiking with former Vice Chairman Don Cohen can be summed up in four words: survival. This high-intensity, marathon-like hike revealed a side of Don that was previously unknown. There's another kind of hiking experience, which I had with my old colleague, Chairman Ben Bernanke. Hiking with Ben was much more relaxed, a leisurely stroll along the winding trails of the Rockefeller Preserve. So before you set off, consider assessing yourself and asking: am I going for the "Cohen mode" or the "Bernanke mode"? The most valuable aspect of this conference is that it allows us all to clear our minds and soberly examine the world and our times. For me, this is the right place, the right audience, and perfect for in-depth discussions on the most important issues. The theme of this conference is innovation. I believe the public and the markets collectively understand that innovation in Federal Reserve policy-making will help achieve both price stability and full employment simultaneously. Next, I will briefly outline the framework of my speech today. You can think of it as an outline or a hiking route—but please don't take it as a forward guidance guide. First, I will discuss several long-term issues that the Federal Reserve is studying, focusing on the latest general-purpose technology—artificial intelligence (AI)—and its potential impact on the economy. Second, I will reflect on the practice of forward guidance and the interaction between central banks and financial markets. Afterward, I will present several core principles that I believe should guide monetary policy formulation. Finally, I will discuss my assessment of the current economic situation. Preparing for the Future Policy Environment The unchanging silhouette of the Teton Mountains lies behind us, but the economic landscape we examine is constantly evolving. Not long ago, in the decade leading up to and following the 2008 financial crisis, economists and policymakers were discussing chronic stagnation and a global savings glut. The prevailing view at the time was that large amounts of capital would remain idle for a long time because attractive investment opportunities were severely lacking, major innovations had already been completed, and economic growth would be sluggish and prolonged. Times have changed dramatically; we are at a historical turning point. The most striking example is artificial intelligence (AI), an emerging technology that has been around for 80 years, whose development speed has even exceeded the expectations of tech enthusiasts just a few years ago. The possibility of a significant acceleration in economic growth is rising. A continuously expanding amount of capital is pouring into various AI-related infrastructures; a kind of "super Moore's Law" is unfolding, and scaling laws are changing the way and speed of innovation. Capital and human resources are jointly building the large language model, the core of AI. Users access the model by purchasing computing power tokens. Reports show that the annualized sales of tokens from just two leading labs exceed $100 billion, a year-on-year increase of over 500%. The Federal Reserve is closely monitoring all of this. We recognize that AI is a completely new variable, and may even become a new factor of production, profoundly impacting economic operations and monetary policy. This raises a series of core unresolved questions: Can the application of AI bring sustained and significant productivity gains across the entire economy? If so, when will this effect manifest? Does the use of computing power tokens complement or replace labor? Will next-generation AI models further increase capital intensity, or will the models themselves foster lightweight capital solutions? Beyond these, many unknowns remain, including the final market structure. Where capital returns will flow and at what pace are they realized remains unclear. In the short term, what proportion of the returns from scarce assets will flow to AI labs, chip manufacturers, energy producers, and cloud service providers? In the long term, how much of this value will ultimately reach businesses and consumers? What broad impact will this have on employment and the Federal Reserve's employment goals? Similarly, we are currently unclear about the equilibrium price of computing power tokens. Will token tiering emerge, with the market willing to pay high fees to use cutting-edge models? Will the price of tokens for older models fall back to marginal cost levels? We will conduct in-depth research on these issues through the Productivity and Employment Task Force. I recently communicated with the heads of this task force and four other task forces, and the progress has been encouraging. However, it needs to be clear that the subsequent recommendations from the task forces will not affect policy decisions at this stage. Nevertheless, I believe that this kind of theoretical preparation will allow us to better address future policy challenges. Forward Guidance and its Alternatives While the various task forces are advancing their research, I will not sit idly by but will proactively promote institutional innovation within the Federal Reserve to adapt to the new situation. For example, I intend to adjust the form and function of the Federal Reserve Chairman's so-called "forward guidance." As you may know, I have long been averse to prematurely releasing predictions about future policies. I prefer a different approach, and I will explain why below. Transparency in communicating future policies is not the ultimate value; communication must serve the Federal Reserve's core mission: to formulate appropriate monetary policy. Forward guidance, as a regular policy tool, was introduced by my colleagues and me during the global financial crisis. In that environment, it was crucial and received considerable attention upon its introduction. However, like many crisis-era legacies, I believe it is no longer appropriate. In a normal economic environment, the role of forward guidance should be strictly limited. Otherwise, while seemingly pursuing clarity, it can easily create ambiguity. Over-disclosing details of policy discussions and making premature commitments about future policies could mislead markets, businesses, and residents. Furthermore, I believe that if policymakers make quasi-commitments about interest rates during the economic cycle, it restricts our ability to make correct decisions at critical junctures. Formulating reasonable policies also requires clarifying the relationship between financial markets and the central bank. The Federal Reserve needs the purest, most unfiltered market signals possible, including internal market indicators, asset price levels and changes across sectors, Treasury bond prices and trading volumes, the dollar exchange rate, credit costs and availability, and prices of a basket of commodities. Throughout the economic cycle, these indicators, along with other data, will help the Fed assess short-term economic activity and inflation prospects, while also reflecting the overall financial environment and the risks and uncertainties inherent in the financial cycle. Meanwhile, market participants should track real-world economic information, independently form expectations about output, employment, and inflation, and remain highly vigilant against various risks. The Fed should remain humble and avoid naiveté. The Fed plays a crucial role in the economy and markets, wielding powerful policy tools; we determine the direction of short-term interest rates, and market participants often anticipate our next move. However, we cannot condone a situation where market participants primarily rely on Fed signals for trading. Economic literature has long explained the distorting effects of this mechanism—the "mirror image" problem. If the market heavily relies on the Fed's forward guidance, and the Fed relies on market prices to judge the situation, both sides are more likely to overlook new changes, struggle to respond to reversals, and ultimately misjudge policy. Ironically, the greatest costs of the "mirror image" often go unborne by market participants; those without financial assets are the ones truly devastated. If the Federal Reserve misjudges inflation and the economic situation, who will suffer the worst consequences? Not the beneficiaries of the financial markets, but ordinary Americans facing the dilemma of high inflation or a sudden decline in job stability. Since forward guidance is not applicable in normal times, shouldn't the new Fed chair at least provide a clear reaction function? That is, how interest rates will be adjusted if economic data overheats or weakens. I also hope that our understanding of the economy is accurate enough to provide a mature, mechanical standard answer, such as relying entirely on simple models like the Taylor rule. However, our current understanding is not yet at that level, and the core factors influencing the rational formulation of monetary policy change over time. Providing forecasts to demonstrate the policy reaction function is theoretically feasible, but its practical implementation is poor; laboratory scenarios rarely work in the real market. Many, like myself, have noticed that the 2021 forward guidance, to some extent, delayed the policy response to high inflation. During my term, my colleagues and I will strive to build more reliable models and more robust rules to support policy decisions. However, we understand that accurate economic forecasting is currently only a goal. Against the backdrop of geopolitics, global supply chains, and rapid technological iteration, we must be keenly aware of the boundaries of our own understanding. Following the same line of thought, we should fully incorporate various viewpoints that contribute to monetary policy decisions. To achieve optimal decision-making, we cannot exclude diverse economic assessments. So, what is a better policy path? Next, I will share several core principles that guide my judgment of the appropriate direction of monetary policy, followed by the previously promised assessment of the economic situation. Core Principles Next, let's discuss policy principles: First, in this area, past data can easily be misinterpreted as the current situation. The difficulty lies in distinguishing between the two. That is to say, we must verify the true economic situation, avoid formulating forward-looking policies based on outdated or distorted data, and not make judgments based solely on a single data point; the trend is the most crucial factor. The Federal Reserve is the decision-making body; we make choices amidst uncertainty, and the data we rely on must be timely, accurate, and actionable. Second, the goal of the Federal Reserve's policy is to roughly match aggregate demand with aggregate supply. However, we can only directly observe economic activity; the true situation on the supply side cannot be directly observed and can only be inferred. Therefore, assessing the current and anticipated supply and demand balance inherently involves uncertainty. Third, it must be clear that the Federal Reserve's 2% price stability target, measured by the Personal Consumption Expenditures (PCE) price index, is a firm and unchanging hard target. It's also important to clarify that price stability will not be achieved automatically, and inflation may not automatically revert to its mean; achieving price stability is the Federal Reserve's responsibility. Fourth, the Federal Reserve also bears the mission of maximizing employment. Achieving both goals simultaneously in the medium term is not a trade-off. I do not believe there is an inherent conflict between the Federal Reserve's dual mandate. After all, high inflation itself severely damages economic prosperity. Fifth, short-term interest rates are the primary tool for achieving these dual mandates. Unconventional stimulus policies are suitable for genuine crisis scenarios; otherwise, they should be used as little as possible, or even avoided altogether. Sixth, money is crucial. This view is not mainstream now, but I believe money and monetary policy are closely related. We need to pay attention to the money created by central banks, as well as the money derived from banks and the financial system. Admittedly, factors such as financial innovation have changed the transmission mechanism between base money, velocity of money, and the macroeconomy, but this does not mean we can ignore the ultimate impact of money on the financial environment and prices. Finally, the Federal Reserve should reduce unnecessary pronouncements and make its communication more targeted to better achieve its goals. The only standard for judging our credibility is whether we can fulfill our statutory responsibilities. To paraphrase General Chuck Yeager, "In critical moments, there are only reasons or results." Current Economic Situation Based on the above principles, how do I view the current economy? What is the true state of affairs? You can refer to the minutes of the July FOMC meeting. The committee reached a consensus that the labor market remained stable, economic output was robust, but inflation remained too high. I and the vast majority of members believed that a more prudent approach was to wait for new information between meetings—especially potential changes in supply chains, capital flows, and geopolitical situations—before judging whether to adjust interest rate policy. At the same time, we are prepared to act promptly based on changes in the situation. In my personal judgment, the current overall economic performance is strong and has shown signs of improvement. One standard for measuring economic resilience is the ability of an economy to withstand shocks. From this perspective, both the real economy and financial markets have demonstrated strong resilience. Several observations: Corporate capital expenditures, which are the foundation of future economic growth, are rising rapidly. Investment in equipment and intangible assets grew by approximately 9% in the fourth quarter, the highest level since 2021. More than half of this year's capital expenditure increase is likely from AI-related construction. Profits of S&P 500 companies have increased by over 20% in the past year, with profit margins at historically high levels. Overall stock market volatility is low. We will continue to closely monitor the market's internal structure and pay attention to the performance of various sectors. Market expectations for capital expenditure and corporate profit growth are very optimistic. I will continue to track changes in their growth rate, i.e., the second derivative, and assess their subsequent cascading effects on asset prices, business confidence, household income, and consumption. Credit spreads for corporate bonds and leveraged loans are near historical lows, and the issuance of such bonds this year is substantial. Looking beyond the fixed-income market and considering the banking sector, a July survey of bank credit officials showed that approval standards for industrial and commercial loans are in a historically lenient range, which explains the growth in industrial and commercial loans this year. The credit market has barely reflected the tightening effects of policies. Some sectors, such as real estate and agriculture, are already showing pressure. However, overall, it is difficult to determine whether the overall financial environment is in a tightening state. Despite various shocks, real consumer spending has remained robust, with growth exceeding 2% over the past four quarters. Coupled with strong investment, domestic private final purchases (PDFP) have risen in tandem. Year-to-date, this indicator's annualized growth rate is close to 3%. This indicator is generally more meaningful than GDP, and its trend is also positive. On the employment side, the US job market is performing well and is generally very stable. The unemployment rate of 4.1% is historically low and has shown little fluctuation in the past two years. As a highly reliable real-time indicator, the four-week moving average of initial jobless claims is at a multi-decade low. In my view, the current low labor market turnover rate is partly due to the large-scale labor-capital realignment in the post-pandemic era. With labor supply growth almost stagnant, the monthly increase in new jobs will naturally be low. There will always be areas of concern in the labor market, such as the employment of recent graduates. However, overall, those who wish to work are generally able to retain or find employment. People may worry about future job market volatility, but currently, the labor market is in a state of full employment. However, the data is more concerning regarding price stability. The Federal Reserve's preferred inflation gauge, the PCE price index, saw a 3.7% year-on-year increase over 12 months and a 4.1% annualized increase over 6 months. Similar indicators for the CPI are also high, with core inflation levels for both PCE and CPI remaining stubbornly high. While these indicators each have their limitations, they all point to the same fact: inflation is above the 2% target. Therefore, the Fed's current core focus should be on prices. Policymakers need to capture core trend inflation, which is the general price movement in the economy after removing specific disruptive factors. To determine whether core inflation is rising, falling, or stagnating, we need to look not only at the direction but also at the speed of change. Major inflation indicators have fallen significantly from their 2022 peaks, but the improvement over the past two years has been limited. Although this summer's PCE and CPI data were better than expected, this is insufficient to indicate a substantial improvement in the core inflation trend. The data also shows moderate wage growth. However, long-term experience has shown that wage growth is not a reliable indicator for predicting future inflation. To analyze core inflation, I will break down the 199 sub-items under the PCE price index. Over the past 12 months, 54% of goods and services in the PCE basket saw price increases exceeding 3%. This proportion is far lower than the post-pandemic peak of approximately 77%, but still significantly higher than the pre-pandemic average of 32%. Looking at the past six months alone, the conclusion is similar: 49% of goods and services in the PCE basket saw annualized increases exceeding 3%, also lower than the post-pandemic high, but still relatively high. The recent overall rise in commodity prices also requires continued monitoring; we need to assess whether this will pose an upward risk to inflation. Another key question: has the persistently high inflation of the past five years been solidified into inflation expectations? The good news is that medium-term inflation expectations indicators have remained generally stable, and inflation compensation data from the swap market also provide a consistent conclusion. Especially considering the recent situation, market pricing reflects the widespread belief that the Federal Reserve can achieve price stability, which reflects both the credibility of the Fed and its consistent tradition. I can assure you that this market confidence will not be disappointed. Historically, market-measured inflation expectations often appear solid until a sudden shift occurs. These expectations do not change easily and are currently well anchored, but we must monitor them closely. The core mission of the Federal Reserve is to prevent inflation expectations from becoming unanchored. One signal cannot be ignored: the responsibility for 65 months of sustained high inflation lies entirely with the central bank—this is undeniable. My judgment criterion is clear: we must be absolutely certain that core inflation is clearly and steadily declining toward our target. If we don't achieve this, we still have work to do. This is our duty, our mission, and the task we must uphold. Conclusion Today I stand here adhering to a set of policy guidelines, not clinging to a single predetermined decision. My colleagues at the Federal Reserve and I are not the first to assume this responsibility at this crucial historical juncture. We are determined to give our all and live up to the expectations of this era. We are fulfilling this important responsibility with humility and determination. Many important matters depend on our decisions. Sound monetary policy can help households and businesses prosper. Effective monetary policy can enhance the endogenous driving force of the American economy and consolidate America's global leadership. I know that the nation needs our careful consideration and wise decisions. It is a great honor to serve again at the Federal Reserve. I sincerely thank my colleagues and everyone present for their support and valuable suggestions. Thank you for listening this morning.