Core Viewpoint - The Bank of Mexico has lowered the benchmark interest rate by 25 basis points to 7.50%, marking the eleventh rate cut since the start of the easing cycle in early 2024, aimed at addressing a weak economic environment [1][7]. Economic Outlook - A survey of 24 economists indicated expectations for the Bank of Mexico to reduce the key rate to 7.50% during the September 25 meeting, with projections suggesting a further decline to 7.00% by the end of 2024 and additional cuts in 2025 [3]. - The Bank of Mexico anticipates a slowdown in global economic activity in the third quarter of 2025 compared to the previous quarter, influenced by ongoing trade tensions and a deceleration in both global and U.S. economies [3][4]. Inflation Trends - The overall inflation rate in Mexico rose from 3.51% to 3.74% between July and mid-September, while core inflation slightly increased from 4.23% to 4.26% [4]. - The Bank of Mexico has adjusted its overall inflation forecast, expecting it to reach the target level of 3% by the third quarter of 2026, despite a slight upward revision in core inflation predictions [4][7]. Monetary Policy Considerations - The decision to lower the benchmark rate was influenced by the assessment of current inflation conditions, exchange rate trends, and the impact of global trade policy changes [7]. - The Bank of Mexico's board will continue to evaluate the possibility of further rate cuts, ensuring alignment with the goal of achieving a sustainable convergence of overall inflation to the target [7].

Core Viewpoint - The Bank of Mexico has lowered its benchmark interest rate by 25 basis points to 7.50%, marking the eleventh rate cut since the beginning of the easing cycle initiated in early 2024 to address a weak economic environment [2][9]. Summary by Sections Interest Rate Decision - On September 25, the Bank of Mexico's board decided to reduce the overnight interbank rate target by 25 basis points to 7.50% [9]. - A Reuters survey indicated that all 24 economists polled expected this rate cut [5]. Economic Outlook - The median forecast suggests that the benchmark rate may drop to 7.00% by the end of this year, with further reductions anticipated in early 2026 [6]. - The Bank of Mexico expects global economic activity to expand at a slower pace in the third quarter of 2025 compared to the previous quarter, influenced by ongoing trade tensions [6]. Inflation Trends - From July to mid-September, the overall inflation rate increased from 3.51% to 3.74%, while core inflation slightly rose from 4.23% to 4.26% [7]. - The Bank of Mexico anticipates that overall inflation will reach the target level by the third quarter of 2026, despite upward risks to inflation forecasts [7]. Monetary Policy Considerations - The board believes that continuing to lower the benchmark rate is appropriate given the current inflation situation, economic activity weakness, and potential impacts from global trade policy changes [9]. - Future rate cuts will be evaluated based on all inflation-related factors, ensuring alignment with the goal of achieving a 3% inflation target [9].

Group 1 - The Federal Reserve has lowered the benchmark interest rate by 25 basis points to a range of 4.00%-4.25% amid signs of economic slowdown and a weakening labor market [1][2][5] - Inflation remains above the target of 2%, with the August CPI rising by 2.9% year-on-year and core CPI increasing by 3.1% [2] - The labor market shows significant weakness, with a downward revision of 911,000 jobs added over the past 12 months and an unemployment rate rising to 4.3%, the highest since 2021 [2][5] Group 2 - The Taylor rule, which has guided monetary policy since the 1990s, is losing its effectiveness, as recent economic conditions have led to deviations from its recommendations [3][4] - The Federal Reserve's credibility is crucial for its ability to deviate from the Taylor rule, allowing for more flexible monetary policy in response to supply shocks and inflation [4][5] - Future monetary policy is expected to focus more on the labor market, with potential for accelerated rate cuts due to ongoing fiscal pressures and government interventions [5] Group 3 - The structural rise in neutral interest rates may limit the scope for aggressive monetary easing, as excessive loosening could undermine the Fed's credibility and reignite inflation [5] - A stable inflation target of 3%-4% could lead to gradual improvements in the labor market, supporting a continued path of interest rate cuts [5] - The anticipated easing of monetary policy may accelerate the repricing of global assets, benefiting physical assets and precious metals, while potentially leading to capital flows favoring emerging markets [5]

Core Viewpoint - The Federal Reserve has initiated its first interest rate cut of 2025, lowering the benchmark rate by 25 basis points to a range of 4.00%-4.25%, driven by economic slowdown and a weakening labor market, despite inflation not yet reaching the 2% target [1][2][3] Monetary Policy Outlook - The focus of the Federal Reserve's policy may shift further towards the labor market in Q4 2025, with a potential acceleration in the pace of rate cuts due to expanding fiscal deficits and increased political intervention [2][6] - A total of 75 basis points in rate cuts is anticipated throughout 2025, with the Fed maintaining a gradual and cautious approach to avoid overly aggressive easing that could destabilize inflation expectations [2][6] Labor Market Analysis - The labor market shows signs of significant weakness, with a downward revision of 911,000 jobs added over the past year, resulting in an average monthly addition of only 70,000 jobs, far below the previously estimated 147,000 [3] - The unemployment rate has risen to 4.3%, the highest level since 2021, indicating reduced hiring intentions and insufficient job growth momentum [3] Taylor Rule and Monetary Policy - The Taylor Rule, historically a key guideline for monetary policy, has become less effective, as evidenced by the Fed's deviation from its recommendations during economic crises [4][5] - In the current context, a weaker response to inflation may be more appropriate, as strict adherence to the Taylor Rule could exacerbate economic downturn risks [4][5] Central Bank Credibility - The credibility of the central bank is crucial for its ability to deviate from the Taylor Rule, as a central bank with strong credibility can better manage supply shocks and achieve a balance between price stability and growth [5][6] - The Fed's long-standing credibility allows for potential rate cuts even when inflation remains elevated, as maintaining high rates could lead to increased economic downturn risks [5][6] Global Asset Repricing - The continuation of rate cuts by the Fed is expected to accelerate the global asset repricing process, benefiting physical assets and precious metals such as energy, metals, real estate, and gold [6] - A weaker dollar may lead to accelerated capital flows, providing relative advantages to emerging markets benefiting from manufacturing shifts and resource exports [6]

Core Insights - Canada's Consumer Price Index (CPI) rose by 1.9% year-on-year in August, up from 1.7% in July, but below market expectations [1] - The month-on-month CPI decreased by 0.1%, indicating a contraction in prices at the monthly level [1] - The core CPI, excluding food and energy, increased by 2.6% year-on-year, remaining stable compared to July, with zero growth month-on-month [1] - Despite the overall inflation rate rising from July, it has been below the Bank of Canada's 2% inflation target for two consecutive months [1] - The current core inflation rate is still above the target level, which the central bank will closely monitor when formulating monetary policy [1] - Market expectations suggest that the Bank of Canada will announce a 25 basis point rate cut at the upcoming monetary policy meeting, lowering the benchmark rate from 2.75% to 2.50% [1] - This expectation is based on the assessment of moderate overall inflation and slowing economic momentum [1] - Analysts note that while recent inflation data indicates easing price pressures, external factors, such as U.S. tariff policies, may create uncertainty for domestic prices and future inflation trends [1] Currency and Market Sentiment - The Canadian dollar continues to fluctuate within a range, reflecting cautious market sentiment regarding the Bank of Canada's policy adjustment path [2]

Group 1 - The UK ILO unemployment rate for the three months to July remains stable at 4.7%, unchanged from the previous three-month periods ending in May and June [1] - The annual growth rate of wages, excluding bonuses, decreased from 5.0% in June to 4.8% [1] - Investors expect the Bank of England to maintain the benchmark interest rate at 4% during the upcoming meeting, following a cautious approach to rate adjustments since August of last year [1] Group 2 - There are indications of a cooling labor market, with preliminary estimates showing a decrease of 8,000 employees from July to August, following a reduction of 6,000 in the previous month [1]

Core Viewpoint - The Indonesian central bank is likely to maintain its benchmark interest rate at 5.0% after two rate cuts, as it assesses recent currency fluctuations and the impact of prior rate reductions [1] Group 1: Central Bank Actions - The Indonesian central bank will hold a meeting the day before the Federal Reserve's meeting, which may lead to a shift in monetary policy [1] - The decision to keep the rate unchanged is seen as temporary, with future adjustments dependent on economic conditions [1] Group 2: Economic Assessment - Economists expect the central bank to evaluate the effects of recent protests and cabinet reshuffles on the Indonesian rupiah's volatility [1] - The central bank will also consider the stronger food price inflation observed recently [1] Group 3: Future Predictions - The baseline forecast suggests a cautious and data-dependent approach, with a potential rate cut of 25 basis points by the fourth quarter of 2025, lowering the rate to 4.75% [1] - The central bank is set to announce its interest rate decision on Wednesday [1]

Group 1 - The Reserve Bank of New Zealand has lowered the benchmark interest rate by 25 basis points to 3% [1]

Group 1 - The Bank of England lowered the benchmark interest rate from 4.25% to 4%, marking the lowest level in over two years, amidst a divided vote within the Monetary Policy Committee [1][2] - The split decision reflects fundamental differences in economic outlook, highlighting a struggle between prioritizing inflation control and economic growth [2][3] - The current economic indicators show a slowdown in GDP growth, rising unemployment, and weak retail sales, indicating pressure on households, while some sectors like high-end manufacturing and green energy remain resilient [3][4] Group 2 - The decision to lower interest rates comes with risks, as maintaining high rates could exacerbate economic decline and increase unemployment, while premature easing could lead to currency depreciation and imported inflation [2][3] - The divergence in global monetary policy, with the Federal Reserve maintaining a restrictive stance and the European Central Bank signaling slight easing, places the Bank of England in a challenging position regarding capital flows and currency valuation [3][4] - Future policy decisions are expected to be data-dependent and characterized by short-cycle adjustments rather than a straightforward move towards easing, leading to prolonged uncertainty in the market [4]

Group 1 - The Reserve Bank of Australia (RBA) has lowered the benchmark interest rate by 25 basis points to 3.60%, marking a two-year low, due to slowing inflation and a loosening labor market [1] - The RBA's decision aligns with market expectations, following a previous hold in July that surprised markets amid rising unemployment and expected inflation decline [1][2] - The RBA remains cautious about further easing policies despite the recent rate cut, citing high uncertainty regarding overall demand and potential supply [1] Group 2 - Recent data shows that overall inflation fell to 2.1% in the June quarter, with core inflation at a three-year low of 2.7%, while the unemployment rate increased from 4.1% to 4.3% [2] - The effects of previous rate cuts in February and May are becoming evident, with consumer spending beginning to rise due to falling inflation and prior tax cuts [2] - The RBA has revised down its economic growth expectations due to persistent productivity issues but still anticipates a stabilization in the labor market [2]