Core Viewpoint - The signs of funding pressure in the repurchase market may lead the Federal Reserve to announce the cessation of its balance sheet reduction in the upcoming interest rate decision [1] Group 1 - Economists at Wrightson ICAP indicate that the slight fluctuations in the repurchase market last week could serve as a key signal for the Federal Reserve [1] - Federal Reserve Chairman Powell hinted earlier this month that the central bank is waiting for the right moment to end the balance sheet reduction [1] - The institution anticipates that the Federal Reserve will begin purchasing U.S. Treasury bonds to offset maturing mortgage-backed securities, thereby maintaining a stable overall balance sheet size [1] Group 2 - As the Federal Reserve shifts towards a neutral policy stance, the monthly supply of short-term Treasury securities may decrease by approximately $20 billion [1]

Core Viewpoint - Morgan Stanley and Deutsche Bank economists expect the Federal Reserve to accelerate interest rate cuts in the coming months due to slowing inflation and a weakening labor market [1] Summary by Relevant Sections Interest Rate Predictions - The market anticipates the Federal Reserve will announce its first rate cut of 25 basis points at the upcoming meeting [1] - Deutsche Bank has increased its forecast for rate cuts in 2025 to three times, while Morgan Stanley predicts consecutive cuts in September, October, December, and January, lowering the upper limit of the target rate to 3.5% [1][1] Economic Conditions - Economists note that slowing inflation and a weak labor market create space for the Federal Reserve to move towards a neutral policy stance more decisively [1] - The labor market's deterioration is expected to lead to further rate cuts in April and July of next year [1] Long-term Outlook - Morgan Stanley maintains its forecast of quarterly rate cuts of 25 basis points until December 2026, bringing rates below 3% [1] - Deutsche Bank's team believes there will be no further cuts next year, but sees potential for more cuts in 2026 due to inflation and labor market expectations [1]