Publications

Treasury yields fell over the past month as futures almost fully price in a second straight rate cut next week, after Powell warned last week that the labor market may now be at a stage where “further declines in job openings might very well show up in unemployment.”

The strength of the financial markets is surprising. Despite geopolitical, commercial and fiscal risks, global stock markets and credit have reached new highs, generating complacency. What sustains markets in the face of adverse macroeconomic and geopolitical logic?

Last week, the Fed resumed its rate-cutting cycle with a 25bp reduction, its first move this year, citing a shift in the balance of risks amid weaker labor market data. It signaled more cuts ahead, with the median year-end rate projection falling after three steady meetings.

The Board noted that “economic activity exhibited sluggishness at the beginning of the third quarter of 2025,” in line with the July’s IGAE print released yesterday, which showed a broad-based 0.9% m/m contraction across all major sectors.

The IOSCO 2025 presentation examines how geopolitical tensions, institutional weakening, aging, climate change, and technological innovations (AI and quantum) interact, amplifying risks and shaping a more unstable global environment.

Powell described today’s move as “a risk-management cut,” with rising downside risks to the employment mandate making it appropriate to resume “moving in the direction of neutral.”

The Central Bank’s Board decided in September to reduce the policy interest rate from 4.50% to 4.25%. With this, the rate in real terms stands at 2.07%. It emphasized that the current rate is very close to the estimated neutral level.