Core Points - The Federal Reserve executed its second interest rate cut of the year, lowering the federal funds rate target range by 25 basis points to between 3.75% and 4% [1] - The Fed's statement highlighted a slowdown in U.S. job growth and a slight increase in the unemployment rate, while inflation has risen since the beginning of the year and remains at a high level [1] - The Fed aims to achieve full employment and a 2% inflation target over the long term, but faces increased uncertainty regarding the economic outlook [1] - Fed Chairman Powell indicated that there are short-term inflationary pressures and downside risks to employment, with significant disagreement within the committee regarding a potential rate cut in December [1] - The Fed announced the cessation of quantitative tightening (QT) and will end its balance sheet reduction plan after three and a half years, marking a key shift towards monetary easing [1] Market Reaction - Following Powell's remarks, U.S. stock markets initially experienced a sharp decline but later stabilized [3] - By the end of the trading day, the Dow Jones Industrial Average and the S&P 500 saw slight declines, while the Nasdaq Composite recorded a small gain and reached a new closing high [3] Balance Sheet Management - The Fed will stop reducing its $6.6 trillion balance sheet due to signs of tightening liquidity in the money market and declining bank reserves [2] - Starting December 1, the Fed will no longer allow up to $5 billion of U.S. Treasury securities to mature without reinvestment, opting instead to maintain government bond inventory stability through rollovers [2]

Group 1 - The Federal Reserve announced a 25 basis point reduction in the federal funds rate target range to 3.75% to 4%, marking the second rate cut of the year [1] - Economic indicators suggest that U.S. economic activity is expanding at a moderate pace, with employment growth slowing and a slight increase in the unemployment rate, although it remains low [1] - Inflation has risen since the beginning of the year and remains at a high level, with the Fed aiming for full employment and a 2% inflation target over the long term [1] Group 2 - Fed Chairman Powell indicated that the employment outlook faces downside risks while inflation presents upside risks, complicating the Fed's decision-making [1] - Following Powell's remarks, U.S. stock indices experienced initial declines but stabilized by the end of the trading day, with the Dow Jones and S&P 500 slightly down and the Nasdaq reaching a new closing high [2] - There is a growing division among Fed officials regarding rate decisions, with two dissenting votes in the recent meeting, highlighting differing opinions on the appropriate rate adjustments [2]

Group 1 - The Federal Reserve's potential announcement regarding interest rate cuts and the influence of newly appointed board member Milan [1] - Discussion on whether the Federal Reserve will end the process of "quantitative tightening" (QT) [1] - Consideration of the Federal Reserve's stance on President Trump's tariff and fiscal policies [1] - Examination of the Federal Reserve's discussions related to the federal government shutdown [1]

Core Viewpoint - The Federal Reserve is expected to lower interest rates by 25 basis points to a range of 3.75%–4%, marking the second consecutive rate cut in this cycle, amid concerns over inflation and a weakening labor market [1][3]. Group 1: Factors Driving Rate Cuts - Inflation remains under control, with September's core inflation below expectations, indicating no runaway risk [3]. - The labor market is showing signs of cooling, as evidenced by a decrease of 32,000 in ADP employment figures for September, reflecting structural weaknesses in hiring demand [3][5]. - The need to manage economic risks is prompting a "risk management" strategy to prioritize job security in the face of unclear data due to the government shutdown [3]. Group 2: Economic Data and Market Reactions - The government shutdown has hindered the Labor Department from releasing monthly employment reports, leading to increased focus on private sector data [5]. - The latest inflation report shows a month-on-month increase of 0.3% and a year-on-year increase of 3.1%, slightly below expectations, reinforcing hopes for a rate cut [5]. - The Federal Reserve's balance sheet has decreased by $2.38 trillion from its peak, currently standing at $6.59 trillion as of September, with indications that the Fed may halt balance sheet reduction to stabilize market liquidity [9]. Group 3: Market Expectations and Scenarios - Market expectations for a further rate cut in December are at 95%, with a 55% chance of another cut in January [9]. - If the Fed signals a continuation of accommodative policies and halts balance sheet reduction, it could boost stock markets, particularly technology growth stocks [10]. - Conversely, if the Fed adopts a cautious stance despite a rate cut, it may create uncertainty in the markets, leading to profit-taking pressures, especially in high-valuation sectors [10].

Core Insights - The U.S. banking system's reserves are a key factor in the Federal Reserve's decision to continue reducing its balance sheet [1] - As of the week ending October 22, bank reserves decreased by approximately $59 billion, reaching a low of $2.93 trillion, the lowest level since the week of January 1 [1] - Following the increase in the debt ceiling in July, the U.S. Treasury has intensified debt issuance to rebuild its cash balance, which withdraws liquidity from the Federal Reserve's balance sheet [1] - The ON-RRP (Overnight Reverse Repurchase Agreement) tool is nearly depleted, leading to a continuous decline in commercial bank reserves held at the Federal Reserve [1] - Analysts from JPMorgan, Bank of America, and others expect the Federal Reserve to halt the reduction of its approximately $6.6 trillion balance sheet this month [1]

Core Viewpoint - The Federal Reserve is expected to lower interest rates again during the upcoming meeting on October 28-29, with a probability of 97.3% for a 25 basis point cut, as indicated by the latest Beige Book report and comments from Fed officials [1][5]. Economic Conditions - The latest Beige Book indicates a slight decline in overall consumer spending, while employment levels remain stable across regions. However, many employers are reducing staff through layoffs or natural attrition due to weak demand and ongoing economic uncertainty [2][4]. - The report highlights that tariffs imposed by the Trump administration are contributing to rising overall inflation, with businesses struggling to balance absorbing costs versus passing them on to consumers [3][4]. Employment Market - The Beige Book notes that while the overall employment level is stable, many regions report increased layoffs or natural attrition. This is attributed to weak demand, persistent economic uncertainty, and increased investment in artificial intelligence [4][6]. - Some companies are finding it easier to recruit, while others still face challenges in hiring, indicating a mixed labor market [4]. Consumer Spending - Recent consumer spending has shown a slight decline, although luxury goods and travel expenditures from high-income groups remain strong. In contrast, middle and low-income groups are increasingly relying on discounts and promotions [4]. Federal Reserve Officials' Comments - Fed Governor Stephen Miran emphasized the need for a rate cut due to increased economic uncertainty from trade tensions, suggesting that the current policy has become more restrictive than previously thought [6]. - Miran supports the idea of two more rate cuts by the end of the year and has previously advocated for a larger cut of 50 basis points rather than just 25 [6]. Market Expectations - Financial markets are betting heavily on a rate cut in October, with only a 2.7% chance of maintaining the current rate and a 94.2% chance of cumulative cuts of 50 basis points by December [5][6].

Core Viewpoint - The U.S. Treasury Secretary, Janet Yellen, emphasizes the need for the Federal Reserve to exercise caution in using quantitative easing (QE), likening it to the careful use of antibiotics. She does not advocate for the Fed to reduce its balance sheet or abandon the ample reserves system, highlighting that QE reform is a critical consideration for the next Federal Reserve Chair [1]. Group 1 - The Federal Reserve should be cautious in implementing quantitative easing policies [1] - There is no support for reducing the Fed's balance sheet or abandoning the ample reserves system [1] - QE reform is an important factor for the next Federal Reserve Chair to consider [1]

Core Viewpoint - The U.S. Treasury Secretary, Yellen, emphasizes the need for the Federal Reserve to exercise caution in using quantitative easing (QE), likening it to the careful use of antibiotics. The next Federal Reserve chair should consider reforms to QE as a significant factor [1] Group 1 - Yellen does not advocate for the Federal Reserve to reduce its balance sheet or abandon the ample reserves system [1] - The reform of quantitative easing is highlighted as an important consideration for the next Federal Reserve chair [1]

Core Points - Federal Reserve Chairman Jerome Powell indicated that the Fed may halt the reduction of its balance sheet in the coming months, supporting investor expectations for another rate cut this month [1][3] - Powell emphasized that the labor market outlook is deteriorating, with increasing signs of weakness [1][3] - The Fed lowered interest rates by 25 basis points last month, marking the first cut of 2025, described by Powell as a "risk management" move to support the weakening labor market [1][3] Economic Outlook - Powell stated that there has been little change in inflation and employment prospects since the last meeting in September [1][3] - He noted that existing evidence shows layoffs and hiring remain low, and perceptions of job opportunities are declining [3] - The lack of official economic statistics due to the government shutdown may lead to challenges in data monitoring [3] Market Reactions - Powell's remarks reinforced market expectations for a rate cut at the upcoming meeting [3][5] - JPMorgan's Michael Feroli stated that Powell's comments strongly confirmed market bets on a rate cut [3] - The Dow Jones Industrial Average rebounded, erasing a decline of about 600 points following Powell's speech [5] Future Policy Meetings - The next Federal Reserve policy meeting is scheduled for October 28-29, with the last meeting of the year in the second week of December [5]

Core Viewpoint - International gold prices have reached a historic high, with New York futures surpassing $4200 per ounce, driven by geopolitical tensions, partial U.S. government shutdown, and recent hints of interest rate cuts from the Federal Reserve [2][4]. Group 1: Factors Influencing Gold Prices - The rise in gold prices is significantly linked to escalating geopolitical issues and the partial shutdown of the U.S. government [4]. - Federal Reserve Chairman Jerome Powell's recent speech indicated a potential end to the balance sheet reduction in the coming months, which has bolstered investor expectations for a rate cut this month [4]. Group 2: Future Predictions - Powell has kept the possibility of a rate cut in October open, emphasizing the need for a balance between ending the fight against inflation too early and supporting the labor market too late [5]. - Analysts from Bank of America predict that gold prices could reach $6000 by 2026, reflecting a bullish outlook on the precious metal [5].