Good morning,
Fed Governor Stephen Miran made headlines yesterday in an interview on Bloomberg and essentially doubled down on his dovish stance. Miran noted that while he does not forecast an immediate economic contraction, he supports pre-emptive policy action to mitigate risks. Unless I have misread this, is he advocating for the Fed to adopt a more proactive forecasting role and reconsider its data-dependent stance?
You will recall that Miran dissented at the September meeting, advocating for a 50-bp , while other members opted for a more standard 25-bp cut, which is what we got. He is certainly the only one using this rhetoric right now, being the only Fed official arguing for a series of 50-bp cuts. Notably, however, more doves are becoming vocal, arguing for swifter easing, but not to the same extent as Miran.
Fed Governor Michelle Bowman supports continued rate reductions but has not endorsed Miran’s aggressive approach. We also heard from Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeff Schmid yesterday, both of whom emphasised caution over excessive rate cuts amid elevated inflationary pressures.
Although a modest dovish repricing was seen yesterday, with -21 bps of cuts priced in for October’s meeting and -39 bps for the year-end, the Fed is unquestionably divided; therefore, October is by no means a sealed deal in my view.
Market in a Minute
The was bid for a second consecutive session on Thursday, adding 0.6% according to the , bolstered by a surprise upward revision to Q2 25 data. Against the , the , and the , the buck gained 0.6%, 0.8%, and 0.6%, respectively. Interestingly, the US dollar Index crossed north of the 50-day SMA at 98.02, signalling the beginning of a potential uptrend.
US Treasury yields flattened yesterday following positive economic data as well as a modest hawkish repricing, hence the stronger bid at the front-end of the curve.
The fell by 0.5% on Thursday, marking a third consecutive session in the red and representing the longest losing streak in a month. The tariff man (Trump) is also back it seems, with pharma Stocks in particular facing pressure following announcements of 100% tariffs on branded drug imports. European pharma stocks will be closely watched today; currently, European equity futures are higher, while US equity index futures are lower.
posted modest gains despite typically unfavourable conditions of rising yields and US dollar strength, suggesting safe-haven demand. also advanced, driven by geopolitical developments affecting Russian energy trade.
Macro Space: PCE Data Eyed
Thursday’s data showed that US economic activity grew by an annualised rate of 3.8% in Q2 25, according to the Commerce Department’s final estimate. This marks a 0.5 percentage point revision from 3.3% in the second estimate, primarily bolstered by more robust consumer spending. The contraction in Q1 (0.5%) was attributed principally to import surges as businesses accelerated their purchases ahead of tariff implementation.
We also received the latest report for the week ending 20 September, showing a decrease to 218,000. This print came in softer than the consensus estimate of 235,000 and below the 232,000 reading from the previous week. , however, remained stable at 1.926 million (week ending 13 September).
The Fed clearly needs to strike a balance here, given that GDP is rising, inflation is elevated (well above target for years now), and the job market is slowing. As a result, all eyes will be on the August data today at 12:30 pm GMT.
Over the last few months, it has edged higher, but today’s print is expected to remain steady at 2.9% for the YY core measure, while a modest uptick is expected in the YY to 2.7% (from 2.6% in July). I have added a screenshot of the LSEG calendar below, which shows the forecast distribution.
Should PCE data come in higher-than-expected – specifically if core and headline reach the upper estimate range of 3.2% and 2.8%, respectively, with both printing new cycle highs – this could temper Fed rate-cut bets and weigh on yields and the US dollar. As noted above, markets are largely expecting two rate cuts this year, which aligns with the Fed’s latest SEP report.
Of course, if today’s data comes in line (or slows), this would likely see markets fully pricing in October’s meeting and add fuel to the US dollar’s recent upside.