17 September 2025 | 2:44PM EDT USA: FOMC Lowers Fed Funds Rate 25bp; SEP Median Projects Three Cuts for 2025, One Each in 2026 and 2027 BOTTOM LINE: The FOMC lowered the target range for the fed funds rate by 25bp to 4-4.25% at its September meeting. The post-meeting statement noted that "downside risks to employment have risen" even as inflation "has moved up." The Committee removed a previous reference to "the extent and timing" of additional fed funds rate cuts in the forward guidance portion of the stat ...

Core Viewpoint - The article emphasizes the political courage and analytical ability of Federal Reserve Chairman Jerome Powell, particularly in the context of his recent speech at the Jackson Hole Economic Policy Symposium, amidst significant political pressure [1][2][5] Group 1: Monetary Policy Framework - Powell highlighted the complexity of monetary policy decision-making, focusing on the dual mandate of price stability and maximum employment, which can create challenges for the central bank [3][4] - The updated framework no longer prioritizes the effective lower bound as a key consideration and has adjusted the average inflation targeting strategy, reaffirming the 2% inflation target as most aligned with the dual mandate [4] Group 2: Historical Context and Comparisons - Powell draws inspiration from past Federal Reserve leaders like Paul Volcker and Alan Greenspan, who faced significant public and political pressures while maintaining their commitment to sound monetary policy [2][5] - The article compares Powell's current challenges to those faced by Volcker during the high inflation of the 1970s and Greenspan's management of low inflation in the post-Volcker era, highlighting the ongoing need for courage and independence in the Federal Reserve's operations [2][3]

Group 1 - The Federal Reserve has initiated a rate-cutting cycle after a year, leading to a weakening of the US dollar, with the dollar index dropping below 97, marking a new low since July 7 [1][5] - The dollar index has decreased by 11% this year, representing its worst performance since 1973, having peaked above 110 at the beginning of the year [2][5] - Analysts predict that the Chinese yuan will continue to appreciate, with the onshore yuan reaching a high of 7.1047 against the dollar on September 17, and the offshore yuan briefly surpassing 7.1 [1][6] Group 2 - Morgan Stanley forecasts that the Federal Reserve will accelerate its rate cuts, expecting four consecutive 25 basis point cuts in September, October, December, and January, potentially bringing the target federal funds rate to approximately 3.375% by January [3] - The expectation of a faster rate cut is based on recent soft inflation and employment data, which provide the Fed with the policy space to move towards a neutral interest rate level [3][5] - Prudential's chief global economist anticipates a gradual reduction in rates to a range of 3.0% to 3.5%, allowing the Fed to assess the impact of tariffs on inflation and labor supply [5] Group 3 - The recent appreciation of the yuan is attributed to the approaching Fed rate cuts and the resulting decline of the dollar, which has created upward pressure on non-USD currencies, including the yuan [6][8] - The strong performance of the domestic stock market and increased foreign capital inflow have also contributed to the rising demand for the yuan, enhancing market sentiment [6][9] - Analysts expect the yuan to maintain a strong position in the short term, with a focus on the dollar's performance and the central bank's management of the yuan's midpoint rate [9]

Core Viewpoint - Market traders are increasingly betting on a significant interest rate cut by the Federal Reserve, with expectations of at least one 50 basis point cut in the remaining three policy meetings of the year [2][3]. Group 1: Market Expectations - Traders are making aggressive bets that the Federal Reserve will implement a 50 basis point cut, with some speculating it could happen as soon as the upcoming meeting [3][4]. - The consensus among Wall Street analysts is that the probability of a 50 basis point cut tonight is low, with a more likely scenario being a 25 basis point cut due to recent labor market slowdowns [2][7]. Group 2: Trading Activity - A significant trade involving 84,000 October federal funds futures contracts was executed, marking the largest block trade in history, indicating that some traders are hedging against a potential surprise 50 basis point cut [5][6]. - The pricing in the swap market suggests an expected cumulative cut of about 70 basis points before the December meeting [7]. Group 3: Economic Context - The labor market's unexpected cooling has led some traders to hedge against the risk of a more substantial rate cut due to deteriorating economic prospects [4][8]. - Analysts note that the Federal Reserve faces conflicting pressures from persistent inflation and a weakening labor market, complicating their decision-making process [8][9].

Group 1 - The Federal Reserve is widely expected to announce a 0.25 percentage point interest rate cut in response to the recent slowdown in the job market [2][3] - The meeting occurs at a politically sensitive time, with the Trump administration exerting pressure on the Fed to lower rates and attempting to influence its board composition [2][3] - There is internal disagreement within the Fed regarding the focus on employment weakness over persistent inflation, with some officials questioning the justification for a rate cut given the current unemployment rate of 4.3% and inflation above the 2% target [3] Group 2 - Recent employment data shows a significant decline in non-farm payroll growth, averaging only 29,000 over the past three months, indicating a clear slowdown in the labor market [3] - The Fed faces challenges in determining the neutral interest rate, currently at 4.3%, with estimates for the neutral rate being adjusted upwards, suggesting the need for several more rate cuts to reach a neutral stance [3] - The quarterly economic projections and dot plot regarding the number of expected rate cuts for the year will be closely monitored by the market, with potential adjustments from two to three cuts [3][4] Group 3 - The upcoming meeting represents a critical decision point for the Fed regarding its independence, political pressures, and economic judgments, with implications for both the U.S. and global economies [4]

美联储会释放哪些新信号 美联储即将重启降息之际，点阵图和经济预测成为市场关注焦点。在法国里昂商学院管理实践教授李徽 徽看来，研究点阵图可以关注三件事。 编者按： 全球市场迎来"超级央行周"，市场普遍预期美联储即将开启降息周期，搅动着金融市场的神经。美东时 间9月15日，美股三大指数齐涨，标普500与纳指创历史新高。16日，国际金价也一路狂飙。在通胀升温 和就业疲软的双重夹击下，外界普遍预计，美联储即将重启降息进程。未来的宽松路径将怎么走？谁在 主宰利率决策？这轮降息能走多远？这场降息博弈，又将如何重塑全球资本流向与资产定价逻辑？ 在市场普遍预期美联储即将重启降息之际，美国东部时间9月15日，美股三大指数全线上涨，标普500指 数和纳指创下历史新高。 2024年9月美联储开启了降息周期，并在去年最后三次利率会议上累计降息了100个基点，联邦基金利率 目标区间被下调至4.25%—4.50%。迈进2025年，美联储已连续五次在利率会议上按兵不动。 美联储重启降息的号角即将吹响。美国东部时间9月17日，美联储将公布利率会议，市场普遍预计至少 会降息25个基点，甚至不排除降息50个基点的可能。 需要警惕的是，在美联储内 ...

Core Viewpoint - BlackRock indicates that the rise in global government bond yields reflects expectations of sustained high interest rates rather than concerns over an impending fiscal crisis [1] Group 1: Market Dynamics - Long-term sovereign bond yields have surged significantly this year across major economies, leading to the steepest yield curves in years [1] - The widening gap between 5-year and 30-year bond yields suggests a shift in market dynamics [3] - The current neutral interest rate is believed to be above historical levels, influenced by loose fiscal policies and high investment spending, particularly in the AI sector [3] Group 2: Investor Sentiment - Despite concerns over fiscal situations, investor demand remains strong, as evidenced by new bond issues receiving billions in subscriptions [3] - France's recent bond auction demonstrated robust demand, even amid political challenges, with its 10-year bond yield premium over German bonds decreasing from a recent high [3][4] - Market movements indicate that investors expect France to eventually resolve its budgetary issues [4] Group 3: Long-term Bond Outlook - The re-pricing of long-term bonds is occurring across major government bond markets, with the pressure on long-term bonds likely to persist [4] - The company expresses limited willingness to allocate to long-term bonds in regions including the UK [4]

Group 1 - Morgan Stanley significantly adjusts its interest rate forecast for the Federal Reserve, expecting a faster pace of rate cuts in response to soft inflation and employment data [1][2] - The new prediction includes four consecutive rate cuts of 25 basis points each in September, October, December, and January, totaling a 100 basis point reduction [1][2] - If this forecast is realized, the target range for the federal funds rate will reach approximately 3.375% by January, aligning with the upper limit of the long-term neutral rate estimated by most Federal Reserve officials [1][2] Group 2 - After the "four consecutive cuts," Morgan Stanley anticipates the Federal Reserve will pause to assess data and its distance from the neutral rate [2] - The firm believes that the ultimate federal funds rate will reach 2.875%, indicating that the current rate is already close to the neutral rate by about 100 basis points [2] - The report suggests that while a 75 basis point cut this year or a one-time 50 basis point cut this month is technically feasible, the downward adjustment will primarily consist of coherent 25 basis point cuts to "more decisively return to neutral" [2]

Group 1 - The Federal Reserve is expected to initiate a new round of interest rate cuts during the monetary policy meeting on September 16-17 [1] - Daleep Singh from PGIM indicates that the Fed's interest rate policy aims to approach the estimated neutral policy rate, but the specific steps to achieve this remain uncertain [1] - The market's expectation of rate cuts is helping to alleviate investor concerns regarding the volatility of fixed income assets, such as long-term bonds [1][2] Group 2 - The inflation rate is projected to remain above 3% until 2026, leading the Fed to adopt a gradual approach of 25 basis point cuts until reaching the estimated neutral rate of 3.0% to 3.5% [1] - This gradual strategy allows the Fed ample time to assess the impact of tariff policies on inflation and labor supply, as well as the subsequent effects of fiscal policy [1] - The August non-farm payroll report shows positive signals, with a moderate impact on the interest rate market and a more significant boost to risk assets like stocks and corporate bonds [2]

Group 1: Reasons for Rising Japanese Bond Yields - The 10-year Japanese bond yield has reached a new high of 1.63%, the highest since 2008, driven by multiple factors including weak bond auction results and reduced demand from life insurance companies[6][7]. - The bid-to-cover ratio for the 20-year bond auction on May 20 was 2.50, significantly lower than the previous auction's 2.96, indicating waning investor interest[11]. - Japanese life insurance companies, holding 17% of government bonds, are reducing long-term bond allocations due to substantial unrealized losses, with one major insurer reporting a loss of 3.6 trillion yen in FY2024[13]. - Political instability following the ruling party's loss in the July 20 elections has exacerbated bond sell-offs, leading to increased market uncertainty[17]. Group 2: Outlook and Risks - The Japanese bond yield is expected to continue rising over the next six months to a year, primarily driven by domestic inflation and interest rate hike expectations, with potential increases of over 50 basis points if the policy rate reaches 1%[30][36]. - The Japanese government debt-to-GDP ratio is projected to remain high at 237%, raising concerns about fiscal sustainability amid rising interest rates[27]. - Risks include a potential debt spiral as rising yields increase debt servicing costs, and the possibility of a "carry trade" unwind, which could lead to market volatility[6][30]. Group 3: Opportunities in Japanese Bonds - The attractiveness of Japanese bonds is increasing as yields rise, making them a viable investment option amid a backdrop of improving economic fundamentals and fiscal outlook[6][30]. - Japan's economy is on a path to recovery, with stable employment and a positive inflation outlook, which supports the long-term investment case for Japanese bonds[6][30]. - Global diversification needs are rising, positioning Japan's bond market as an attractive alternative for investors seeking options beyond the U.S. and European markets[6][30].