Group 1: Fed Rate Decision - The Fed cut the federal funds rate target range by 25 basis points to 4.00%-4.25% on September 18, 2025, the first rate cut in nine months this year [2][3] - The Fed removed the statement of "robust labor market conditions" and added concerns about employment growth slowdown, a slight rise in the unemployment rate, and increased downside risks to employment [2][3] - This rate cut is a "risk management" cut to address the risk of labor market deterioration rather than inflation pressure [3] - The FOMC dot plot shows that two more rate cuts are expected this year, but there is significant internal disagreement, with less than half of the officials supporting three rate cuts in total [3] Group 2: Market Reaction - After the resolution, the US 10-year Treasury yield initially dropped and then rose, indicating that the market digested short-term easing but long-term interest rate pressure remained [4] - The gold market first rose and then fell, showing that market risk aversion briefly released and then returned to calm [4] - The rate cut eased market liquidity pressure, but due to coexisting employment and inflation risks, asset prices showed differentiation, with the bond market rising in a volatile manner and gold falling under pressure [4] Group 3: Economic Outlook - The median forecast for real GDP in 2025 is 1.6%, up from the June forecast of 1.4% [25] - The median forecast for the unemployment rate in 2025 remains at 4.5%, with a slight change in the range compared to the June forecast [25] - The median forecast for PCE in 2025 is 3%, with no change from the June forecast, and the forecast for future years shows a gradual decline towards the 2% target [25] - The median forecast for the federal funds rate in 2025 is 3.6%, down from the June forecast of 3.9% [25]

Core Viewpoint - The U.S. labor market risks are increasing, prompting the Federal Open Market Committee (FOMC) to shift its focus towards stabilizing growth and initiating a monetary easing cycle, with expectations of interest rate cuts in the near future [1][2][4]. Economic Indicators - The unemployment rate rose to 4.3% in August, and revised data indicated a loss of jobs in June, highlighting a cooling labor market [2][3]. - A benchmark revision showed that over 910,000 jobs were added in the past year compared to initial reports, indicating a significant downward adjustment in employment figures [2][3]. Federal Reserve's Stance - The Federal Reserve's position has shifted since summer, with officials increasingly prioritizing employment stability over inflation concerns [2][3]. - Recent market pricing indicates a high probability of rate cuts in September, October, and December, with expectations of 25 basis point reductions in each meeting [4][5]. Predictions and Market Reactions - Morgan Stanley and Deutsche Bank have adjusted their forecasts, now predicting three rate cuts of 25 basis points each in the remaining meetings of the year, reflecting a more aggressive easing stance [4][5]. - The market anticipates that the Federal Reserve may adopt a more neutral policy stance, with potential for continued rate cuts into 2026 [5]. Economic Forecasts - The upcoming quarterly economic projections from the Federal Reserve will provide insights into inflation, unemployment, and interest rate expectations, which are crucial for market direction [3][4].

Group 1: Federal Reserve Insights - Jerome Powell indicated a shift towards dovish policies, emphasizing rising employment risks and a potential interest rate cut in September with a probability of about 90%[2][9] - The Federal Reserve has abandoned the average inflation target established in 2020, reverting to a 2% inflation target while maintaining a focus on employment risks[2][22] - The labor market is showing signs of weakness, with a decrease in hiring rates and a widening gap between non-farm employment and ADP employment figures, indicating potential downward revisions in future data[3][21] Group 2: Economic Indicators - The NAHB housing market index fell to 32 in August, nearing a ten-year low, reflecting ongoing weakness in the housing market[10] - Initial jobless claims and continuing claims have shown a slight upward trend, supporting concerns about the labor market[10][14] - The U.S. economy's second-quarter GDP growth was revised to an annualized rate of 3%, indicating resilience despite rising inflation risks[20] Group 3: Risks and Considerations - A significant improvement in employment data or a substantial pass-through of tariff costs to consumers could disrupt the Fed's rate-cutting plans[4][31] - The ongoing trade tensions and tariff adjustments may continue to impact consumer purchasing power and overall economic stability[21][24]

Market Overview - International gold prices saw a significant increase on August 22, closing at $3,367.86 per ounce after reaching a high of $3,378.76 [1] - The SPDR Gold Trust, the world's largest gold ETF, maintained its holdings at 956.77 tons [8] Federal Reserve Insights - Federal Reserve Chairman Jerome Powell indicated that changes in baseline outlook and risk balance may necessitate adjustments in policy stance, with a focus on the labor market nearing full employment [2] - Powell emphasized that inflation risks are tilted upward in the short term, while the impact of tariffs on consumer prices is becoming clearer, although the timing and magnitude remain uncertain [2] - Fed officials, including Harmack, expressed caution regarding any rate cuts, noting that the labor market is showing signs of weakness and inflation is still above target levels [3] Credit Rating and Economic Outlook - Fitch Ratings confirmed the U.S. sovereign rating at "AA+" with a stable outlook, citing the country's large economic scale and the dollar's status as a global reserve currency [4] - However, high fiscal deficits and rising government debt levels pose limitations to this rating, with projections indicating that the government deficit as a percentage of GDP will decrease from 7.7% in 2024 to 6.9% in 2025, before rising again in subsequent years [4] Geopolitical Developments - U.S. Vice President Vance mentioned the possibility of new sanctions against Russia to pressure for an end to the Russia-Ukraine conflict, while clarifying that U.S. ground troops will not be deployed [6] - Russian Foreign Minister Lavrov highlighted the complexities of direct negotiations, stating that the legitimacy of the Ukrainian president is a concern for any potential meeting [6][7] Economic Indicators - The market is closely monitoring upcoming economic indicators, including Germany's IFO Business Climate Index and U.S. new home sales [9]

Core Viewpoint - Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole Economic Symposium suggests a potential interest rate cut in the coming months despite rising inflation risks in the U.S. [1] Group 1: Employment Market Risks - Powell highlighted the "peculiar balance" in the U.S. labor market, where both supply and demand are slowing, leading to a stable unemployment rate but significant downside risks [2] - July's non-farm payrolls showed only 73,000 new jobs, far below the expected 115,000, with previous months' figures revised down significantly [2] - The rising unemployment rate, which increased by 0.1 percentage points to 4.2% in July, indicates a cooling job market [2] Group 2: Monetary Policy Adjustments - The recent employment data supports a shift in the Federal Reserve's policy framework, with a consensus forming around a potential rate cut in September [3] - A 25 basis point cut is seen as the most likely option, allowing for a signal of easing without alarming the markets [3] - Upcoming employment and CPI data will be crucial in determining the timing and extent of any rate cuts [3] Group 3: Global Market Implications - A rate cut in September could lead to a weaker dollar, encouraging capital flows into emerging markets and boosting global risk appetite [4] - The potential for a shift in cross-border capital flows may present a revaluation opportunity for emerging market assets [4] - If the core PCE price index falls below 2.8% in October, further rate cuts could follow, totaling 50 to 75 basis points by year-end [4]

Core Viewpoint - The Federal Reserve's focus should be on the overall interest rate path rather than just individual meeting decisions, as inflation remains above target levels with ongoing risks [1] Summary by Relevant Sections - **Inflation and Interest Rates** - Inflation is currently above the target level, indicating persistent risks [1] - The interest rate path may include a pause in rate cuts if employment market risks escalate [1] - **Employment Market** - The next employment report could either justify a rate cut or not, depending on its specifics [1] - Risks in the employment market are rising but have not yet manifested [1] - **Tariffs and Inflation Effects** - The inflation effects from tariffs are expected to gradually dissipate [1] - **Policy Adjustments** - The Federal Reserve is moderately tightening policy and will continue to adjust the interest rate outlook until the September meeting [1]

Group 1 - Federal Reserve Chairman Powell opened the door for a potential interest rate cut in September, citing rising risks in the labor market despite ongoing inflation concerns [1] - Powell indicated that the employment market is in a "delicate balance," with significant slowdowns in both labor supply and demand, and highlighted that recent job growth has been much weaker than previous estimates [1] - Following Powell's remarks, investors increased bets on a rate cut during the upcoming Federal Open Market Committee (FOMC) meeting on September 16-17 [1] Group 2 - Powell's speech occurred against unprecedented pressure from Trump and allies demanding quick rate cuts, which raises concerns about the Fed's independence [2] - The Fed updated its monetary policy framework, removing the phrase "employment below maximum level shortage" and clarifying that employment levels may sometimes exceed real-time assessments without necessarily posing risks to price stability [2] - There is a notable division among Fed officials regarding the path for rate cuts, with some advocating caution while others suggest support for a September cut following weak employment data [2][3] Group 3 - The Fed has maintained interest rates unchanged this year after three consecutive cuts at the end of last year, with some officials worried that tariffs could lead to sustained inflation [3] - Recent data showed that wholesale prices recorded their fastest increase in three years in July, reinforcing concerns about inflation [3]

Core Viewpoint - The Kansas City Federal Reserve President, Esther George, believes that inflation risks are slightly higher than employment market risks, indicating that current monetary policy is appropriately positioned [1] Group 1: Monetary Policy - Esther George stated that as the dual mandate goals are approached, it becomes more challenging to determine the direction of policy rates [1] - The ongoing debate about when to lower interest rates hinges on whether individual decision-makers perceive the policy as overly tight [1] - George believes that while the policy is somewhat tight, it is on the right track [1] Group 2: Economic Indicators - Recent consumer and business price data indicate that inflation in the U.S. has accelerated in recent months [1] - There is new evidence that businesses are able to pass some of the rising import costs onto consumers [1] - The employment market has shown signs of slowing down, with an average addition of only 35,000 jobs per month over the past three months [1]

Core Viewpoint - The Kansas City Fed President, Esther George, believes that inflation risks are slightly higher than employment market risks, indicating that current monetary policy is appropriately positioned [1]. Group 1: Monetary Policy - Esther George stated that as the dual mandate goals are approached, it becomes increasingly difficult to determine the direction of policy rates [1]. - The ongoing debate about when to lower interest rates hinges on whether individual policymakers perceive the current policy as overly tight [1]. - George believes that while the policy is slightly tight, the Fed is on the right path [1]. Group 2: Inflation and Employment - Recent data shows that inflation in the U.S. has accelerated in recent months, with evidence that businesses can pass some rising import costs onto consumers [1]. - The employment market has shown signs of slowing down during the summer, with an average addition of only 35,000 jobs per month over the past three months [1].

Group 1 - The core debate within the Federal Reserve regarding interest rate direction is intensifying, with President Trump pressuring for rate cuts and key officials expressing differing views [1] - Bowman, the Vice Chair for Supervision appointed by Trump, indicated that the timing for a rate cut may be approaching, causing significant market reactions and highlighting internal conflicts within U.S. economic decision-making [1][3] - Bowman emphasized the need to consider adjusting policy rates due to potential risks in the labor market, while maintaining an optimistic view on inflation returning to the 2% target [3][4] Group 2 - Bowman supports a potential rate cut at the next meeting if inflation pressures remain controlled, aiming to maintain a healthy labor market [3] - Waller, another key Federal Reserve official, also expressed openness to rate cuts, increasing market expectations for a reduction and putting pressure on current Chair Powell [4] - Trump continues to exert pressure on the Federal Reserve for significant rate cuts, attempting to align monetary policy with his economic strategies [4]