Core Viewpoint - The Federal Reserve's recent rate cut indicates a cautious approach to growth risks, with Chair Powell adopting a dovish tone and emphasizing labor market weaknesses beyond current data [1][2]. Group 1: Federal Reserve Actions - The Fed has cut rates by 175 basis points since September 2024, with growth projected at 2.3% for the next year, placing policy near neutral [2]. - Powell stated that the fed funds rate is now "within a broad range of estimates of neutral," marking a shift from previous guidance [2]. - The Fed's announcement of Treasury bill purchases is perceived as dovish, contributing to a bull steepening in yields and a rally in risk assets [1][2]. Group 2: Global Economic Context - Most major central banks, including the ECB, RBA, and Bank of Canada, are signaling potential rate hikes rather than cuts, indicating a global easing cycle nearing its end [2]. - The long end of the yield curve reflects a solidly expanding economy, with thirty-year Treasury yields rising 35 basis points to 4.86% [3]. Group 3: Inflation and Economic Growth - Progress has been made on inflation, with Powell noting that most overshoot is due to tariff-driven goods rather than domestic overheating [4]. - Excluding tariff-affected goods, inflation is in the low 2% range, and goods inflation is expected to peak in early 2026 [4]. - Tax cuts are anticipated to further boost the expanding US economy, with fiscal programs supporting growth in major economies [5]. Group 4: Future Outlook - The era of aggressive rate cuts is likely over, with the bar for further easing set high due to steady growth and cooling inflation [5]. - The long end of the curve is expected to remain rangebound, balancing lower policy rates with structural forces [5].