Overview
- The Federal Reserve lowered its policy rate by 25 basis points to 3.75%–4.00% and signaled its balance sheet runoff will end in December, but Chair Jerome Powell said another cut next month is not a foregone conclusion.
- Missing government reports during the shutdown left policymakers without key labor and inflation data, prompting heavier reliance on private indicators and fueling volatility in rate expectations.
- Futures trimmed the probability of a December Fed cut to roughly 68% from about 85% before Powell’s remarks, as stocks swung, Treasury yields rose and the dollar firmed.
- The Bank of Japan kept its short-term rate at 0.5% by a 7–2 vote, with Naoki Tamura and Hajime Takata again favoring a hike to 0.75%, and reaffirmed it would raise borrowing costs if economic and price trends align.
- Governor Kazuo Ueda highlighted high uncertainty from global trade policies and the need to confirm a durable wage–price cycle, while the yen weakened to around 153 per dollar after the hold following earlier support from U.S. Treasury comments on ‘sound’ policy.