I don’t envy the Federal Reserve’s (Fed) job.

Last week, 4 Fed officials talked about their view on reducing interest rates in the coming months. And let me tell you, it’s not easy to interpret most of their speeches and statements.

It goes to show that managing monetary policy is not a walk in the park – especially if it’s for the United States.

But even then, it’s just a guess for me. None of the Fed officials are allowed to directly comment on where the interest rates are going before the official Federal Reserve Committee meetings.

From what I can see now, Fed officials are not really ‘dovish’ or ‘hawkish’. If you don’t understand this, here is a quick guide.

Dovish: More relaxed attitude on inflation. Prefers to reduce the interest rate.

Hawkish: More up-tight attitude on inflation. Prefers to keep interest rates high.

Many people in the ‘markets’ like to put these labels. That’s because it’s easy to understand what a Fed official ‘stance’ is.

But if you read their statements, and listen to their speeches, you would know that they always avoid falling into a ‘stance’. That’s because none of them wants to get into trouble for signaling to people what interest rates might be.

Their words impact the markets. And investors always have very different interpretations of whatever Fed officials have to say. So, they always stay very ‘neutral’ on what they say AND they always say it’s their opinion and not the Fed’s one.

My takeaway is this – stop basing your investment decisions on short-term events like these. Instead, focus on learning the fundamental economic indicators that the Fed is looking at.

Here’s a list of them:

1.      Inflation: The Fed has a mandate to keep inflation rate at 2%.

2.      Economic growth (Gross Domestic Product): The Fed has a mandate to maximise growth.

3.      Job market: Unemployment rate, initial jobless claims and payrolls.

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