Core Viewpoint - The Federal Reserve is facing a complex situation characterized by high inflation driven by supply shocks, particularly tariffs, while simultaneously observing weakening economic indicators, leading to a challenging decision-making environment regarding interest rate adjustments [2][4][5]. Group 1: Economic Conditions - Inflation is currently above the Fed's target, especially on a core level, indicating potential future inflationary pressures [2][4]. - Employment numbers are showing signs of weakness, complicating the Fed's response to inflation [2][5]. - The economy is experiencing a stackflation scenario where both inflation and economic weakness are present [2][5]. Group 2: Federal Reserve's Dilemma - The Fed is concerned about inflation expectations and their stability, which could influence their decision-making regarding rate cuts [4][10]. - There is a reluctance to cut rates quickly due to fears that inflation expectations may rise and become anchored at higher levels [5][6]. - The Fed's independence is under scrutiny, particularly with political pressures that could lead to easier monetary policy in the future [7][8]. Group 3: Historical Context and Comparisons - Historical examples from countries like Turkey and Argentina illustrate the risks associated with compromised central bank independence, leading to high inflation and interest rates [9][10]. - The current situation mirrors past instances where central bank independence was challenged, raising concerns about the Fed's ability to manage inflation expectations effectively [9][10].

LIVE Dow Set to Open Up as Market Focuses on the Fed The Fed is widely expected to resume cutting interest rates, with markets pricing in a 25 basis-point rate reduction, LSEG data show. However, a larger 50 basis-point reduction looks unlikely and Danske Bank analysts said they expect "a more gradual rate-cutting cycle rather than back-to-back cuts." They cited Friday's University of Michigan's consumer confidence survey for September, which showed one- year inflation expectations remained elevated at 4.8% ...

Currency Market - The euro rose by +0.03% after hawkish comments from ECB officials, indicating a potential end to the rate-cut cycle, contrasting with expectations of multiple rate cuts by the Fed [1] - The dollar index increased by +0.04% due to higher T-note yields, but fell back after a decline in consumer sentiment [5] - USD/JPY rose by +0.22% as political uncertainty in Japan and a commitment from US and Japanese officials to let markets determine currency rates reduced safe-haven demand for the yen [7][9] Inflation and Economic Sentiment - The University of Michigan's 1-year inflation expectations remained at +4.8%, while 5-10 year expectations rose unexpectedly to +3.9% [3] - The consumer sentiment index fell to a 4-month low of 55.4, indicating weaker consumer confidence than expected [3] Precious Metals - December gold closed up +0.35%, and silver rose +1.62%, supported by expectations of Fed rate cuts and increased geopolitical risks [10][11] - Gold prices are bolstered by central bank purchases, with China's PBOC increasing its gold reserves for the tenth consecutive month [11] - Political uncertainties in France and Japan are driving demand for gold as a safe-haven asset [12]

Meanwhile, a new op-ed in the Wall Street Journal out today. Our next guest saying the assault on the Fed's independence should concern everyone. Former Federal Reserve vice chair and Princeton professor Alan Blinder joins us now to discuss his piece as well as this morning's inflation print.So, I know we've had you on before, Alan, and and you and you've been worried about what the president's doing with Lisa Cook and sort of jaw boning around Fed Chair Powell, but is there any real evidence that the Fed i ...

Global Economy & Policy Insight Weekly 3 September 2025 Takahide Kiuchi is executive economist at Nomura Research Institute. This is his personal view. Takahide Kiuchi t-kiuchi@nri.co.jp To receive this publication, please contact your local Nomura representative. Is the Fed's independence coming to an end? See Appendix A-1 for disclaimers. Japanese version published on September 3, 2025 Summary: US President Donald Trump announced on 25 August that he was firing US Federal Reserve Governor Lisa Cook, alleg ...

We start with the continuing battle over the Federal Reserve, as President Trump insists that Governor Lisa Cook must go and Ms. . Cook refuses to leave, even as the president's nominee to replace another governor heads toward Senate confirmation. Our special contributor Larry Summers has consistently expressed his concerns about Fed independence, but so far, the markets have been calm.So, Larry, continued focus on the Federal Reserve as the proceedings with respect to Governor Cook-- Lisa Cook--as Presiden ...

Market Outlook & Inflation Expectations - The market is pricing in the possibility of a 4-3 majority within the Fed leading to lower rates and a potential return of inflation [5][6] - Longer-dated inflation expectations are ticking up, with the 5-year inflation swap reaching its high for the year, indicating concerns about potential decisive action from the Fed [3][4] - The market is not making significant progress, experiencing chop due to a back-and-forth between soft economic data and positive earnings reports from top 10 stocks [9] Investment Strategy & Portfolio Positioning - The firm suggests investors should prepare for potentially weaker economic and stock market numbers in the coming weeks, indicating a near-term top for equities [10] - A pullback of 5% to 10% is possible, leading the firm to recommend trimming positions [10] - The firm maintains an overweight position in large-cap stocks and believes in the tech and AI stories, but suggests reducing some holdings in these areas [11] - The firm downgraded communication services to neutral due to concentration, with two constituents accounting for roughly 70% of the sector's market cap [11][12] - The firm favors recycling proceeds into fixed income, specifically 3 to 7-year maturities, as a parking place for the next few weeks [12] Market Concentration - The top 10 stocks account for 40% of the S&P 500's market cap, highlighting a concentration risk [8]

Between the extraordinary effort to fire a sitting Fed governor with no kind of due process surrounding the for cause provision. Between the ominous rhetoric about hijacking the process for choosing local residents of the regional Federal Reserve between rumors about other members of the Fed board. We are in completely unprecedented territory.There hasn't yet been a dramatic market reaction. There are some concerning things in markets, not just one year ahead, but one year, one year ahead. Inflation expecta ...

The University of Michigan’s Consumer Sentiment Index fell to 58.2 in August, down from 61.7 in July and 14.3% lower year-over-year, marking a three-month low. The Current Conditions Index dropped to 61.7 and Expectations to 55.9. Short- and long-term inflation expectations rose to 4.8% and 3.5%, respectively. https://t.co/0cEH3my7q9 ...

Bond investors’ inflation expectations have steadily climbed since April as Trump imposed tariffs on trading partners and rising stock prices eased financial conditions https://t.co/5WtQhvU2o7 ...