Last night’s Fed meeting was a fairly muted event. Rates were held as expected, and there was no change to the forecast of two rate cuts for the rest of the year, with October’s meeting pencilled in as the first. The main takeaway was Powell cutting growth forecasts and warning of additional inflation stemming from tariffs. He reiterated the Fed’s position to wait and see how this affects the economy before acting too soon. There is division among officials, with seven now projecting no cuts in 2025, compared with ten who foresee at least two.
Today, we have the Norges Bank this morning, which is widely expected to hold rates steady. At lunchtime, the Bank of England is also expected to keep rates on hold. It will be interesting to see whether recent cost pressures from escalating conflicts are reflected in today’s press conference, with two rate cuts still pencilled in for the remainder of the year.
Uncertainty remains around whether the US will enter the conflict in Iran, as US officials prepare for a possible strike while President Trump says no final decision has been made due to the fluid situation. WTI is trading at $75.40 a barrel, still pricing in a risk premium in case the conflict escalates.
Japan’s auction of five-year government notes saw its strongest demand in almost two years, which may ease investor concerns after recent spikes in longer-term yields. Further auctions in two- and 20-year bonds next week will indicate whether this momentum continues.
