Don’t fight the FRED

The Fed hiked rates in September because the economic data, particularly from FRED, showed inflation exceeding their 2% target. This means money market yields will remain attractive, as the Fed will likely hold rates higher for longer rather than hiking further.

While the market expects more hikes, the Fed might pause. Consumer sentiment is falling, and higher borrowing costs could slow the economy faster than anticipated. The dot plot suggests only a mild increase is probable, with potential rate cuts not appearing until 2027.

Japanese banks appear stable despite inflation and a weak yen, reporting strong capital and liquidity. Meanwhile, market participants are progressing on the SEC's Treasury clearing mandate, set for June 2027.