Core Viewpoint - The Federal Reserve's "third mission" of pursuing moderate long-term interest rates has gained attention, especially after new board member Stephen Milan's dissenting vote against a 25 basis point rate cut, advocating instead for a 50 basis point cut, indicating potential political influence from the White House [1][2][3]. Group 1: Federal Reserve's Rate Decisions - On September 17, the Federal Reserve announced a 25 basis point cut in the federal funds rate target range to 4.00% to 4.25%, marking the first rate cut of 2025 and following three cuts in 2024 [1]. - Milan's dissenting vote highlights a significant internal division within the Federal Reserve, with 11 votes in favor of the rate cut and 1 against, suggesting a strong consensus despite political pressures [2][4]. - The dot plot revealed a notable divergence in opinions among the 19 voting members regarding future rate cuts, indicating a lack of consensus on the pace of monetary easing [5]. Group 2: Economic Forecasts and Implications - The Federal Reserve slightly raised its GDP growth forecast for 2025 from 1.4% to 1.6%, while maintaining its predictions for unemployment and inflation for 2024 [5]. - For 2026, the Fed's outlook suggests higher growth, lower unemployment, and higher inflation, with the terminal rate projected to decrease to 3.4% from 3.6% [5]. - The current economic data indicates a shift in the Fed's focus towards stabilizing the labor market, with a cautious approach to future rate cuts [7][8]. Group 3: Market Reactions and Investment Opportunities - The anticipated continuation of rate cuts may lead to a revaluation of global assets, benefiting physical assets and precious metals, such as energy, metals, real estate, and gold [6]. - A weaker dollar could accelerate capital flows into emerging markets, particularly those benefiting from manufacturing shifts and resource exports [6]. - The Fed's cautious stance on rate cuts reflects a balancing act between achieving its dual mandate of maximum employment and price stability while navigating political pressures [8][9].

Core Viewpoint - The Federal Reserve announced a 25 basis point reduction in the federal funds rate target range to 4.00%-4.25%, aligning with market expectations and reflecting a strong internal consensus within the Federal Open Market Committee (FOMC) [1] Group 1: Federal Reserve Actions - The FOMC voted 11 to 1 in favor of the rate cut, with only new member Milan opposing, advocating for a 50 basis point cut [1] - The FOMC acknowledged a slowdown in economic activity and a deceleration in job growth, indicating a conflict between price stability and full employment [1][6] - The FOMC's forward guidance suggests a potential for two more rate cuts this year, totaling 50 basis points, with some members hinting at a more aggressive stance [2] Group 2: Market Reactions - Following the announcement, U.S. Treasury yields fluctuated, with the two-year yield rising by 5 basis points to 3.55% due to cautious remarks from Powell [5] - The S&P 500 index experienced a brief rise before closing down 0.1%, indicating that the market had already priced in the decision [5] Group 3: Economic Indicators - The U.S. unemployment rate rose to 4.3%, the highest since October 2021, with job growth nearly stagnant this year [5] - The Labor Department's revised data indicated nearly 1 million fewer jobs added than previously reported, heightening FOMC concerns about employment deterioration [5] Group 4: Future Outlook - Analysts suggest that the Fed's current stance reflects a delicate balance between inflation pressures and a weakening labor market, with a focus on employment conditions [6][7] - Powell emphasized the need for data-driven decisions and maintaining the Fed's independence, acknowledging potential inflationary pressures from tariffs [7]