Recently, the remarks made by Fed official Kashkari have caused a huge stir in the financial markets. He warned that the U.S. economy is facing the threat of stagflation, and that hasty and significant interest rate cuts could lead to uncontrolled prices. These remarks were like a bucket of cold water thrown on the market, resulting in a noticeable fall in U.S. stocks during the midday session, with the Dow Jones index dropping nearly 200 points and the Nasdaq index following suit.

Stagflation is an economic term that refers to a state where economic growth stagnates while inflation rates remain high. Currently, it seems that the U.S. economy is in such a predicament: the September ADP employment report showed a decrease of 32,000 jobs, far below the previously expected increase of 51,000; at the same time, the number of initial unemployment claims has risen to the highest level in four years. However, the inflation rate still hovers around 3%, far from the Fed's target of 2%.

This situation puts the Fed in a dilemma. Kashkari believes that a significant rate cut is akin to injecting stimulants into the economy, which will only exacerbate inflation issues. However, the market has high expectations for a 25 basis point rate cut in October, with a probability as high as 94.6%. This market expectation is partially driven by the risk of a government shutdown facing the U.S. on October 1, which may even affect the timely release of non-farm payroll data. Some officials are concerned that the economy may collapse and hope to salvage the situation through a rate cut.

For ordinary people, the outcome of this economic game will directly affect daily life. If interest rate cuts lead to increased inflation, the prices of imported goods and energy may rise, further weakening purchasing power. On the contrary, if high interest rates are maintained, the economy will continue to be sluggish, making it more difficult to invest or find side jobs.

In the face of this complex situation, ordinary investors should maintain a cautious attitude. During stagflation, high-risk investments may lead to greater losses. Instead, attention should be focused on assets that can hedge against inflation risks, such as certain commodities or inflation-protected bonds. At the same time, improving personal skills and professional competitiveness is also an important means to cope with economic uncertainty. Regardless of the direction of the economy, maintaining rationality and a long-term perspective is key to dealing with market fluctuations.