Why did the U.S. stock market rebound significantly? A key statement from this Federal Reserve dove

On Friday, Federal Reserve Bank of Chicago President Austan Goolsbee stated in an interview that there is still "considerable room for rate cuts" in the next 12 to 18 months.

This statement resonated with the mild PCE inflation data released that day, pushing the three major U.S. stock indices higher, with the Dow Jones rising nearly 500 points and the Nasdaq gaining over 1%.

Goolsbee believes that the current interest rate level is too high for the healthy development of the U.S. economy:

"I have adjusted the rate cut path for 2025 to be slightly more gradual, but I have always said that the overall trend is that inflation has decreased significantly...

I believe we are on the path to 2%, and there is still considerable room for rate cuts in the next 12 to 18 months."

Goolsbee is considered one of the more dovish officials within the Federal Reserve. Previously, on December 6, he hinted at a possible slowdown in rate cuts in 2024, which once triggered a market adjustment in expectations for rate cuts next year.

At that time, Morgan Stanley analysts pointed out that Goolsbee's last public remarks were made before the release of relatively mild inflation data in November, and he may not have fully considered the latest inflation data. His latest statement indicates that after seeing the latest inflation data, he has a clearer stance on rate cuts.

The significance of this shift in statement lies in the fact that if even the most dovish Federal Reserve officials believe there is a need to slow down the pace of rate cuts, then the overall policy direction of the Federal Reserve may become more cautious. However, his latest remarks reaffirmed support for rate cuts, which undoubtedly injected a strong dose of confidence into the market