The Federal Reserve (Fed)’s 25bps cut to the 4.00–4.25% target range was largely within expectations. Markets initially interpreted the move as dovish, but sentiment quickly turned hawkish following Chair Powell’s press conference, where he emphasized caution around inflation risks. This led to intraday whipsaw across asset classes, with Treasury yields ultimately trending almost flat by the end of the session.
We have consistently expressed bearish views on the US economy in our past commentaries, and the latest preliminary US employment benchmark revision reinforces this stance. The data shows we are now in our third—and worst—consecutive year of significant downward job revisions, a trend not seen in more than two decades.
Source: Data as of September 2025, US Bureau of Labor Statistics
Notably, the Fed’s messaging has begun to shift, subtly flagging growth concerns that are becoming increasingly difficult to ignore. The month-to-date rally in long-end Treasury yields suggests that more investors are starting to focus on the underlying fundamentals of the economy, with a weakening growth picture looming clearer on the horizon.
While Powell’s comments on inflation may act as a counterbalance to keep long-end Treasury yields elevated, we remain firm in our belief that any rise in inflation stemming from tariff pass-through effects will be short-lived. Post-COVID high prices, dwindling consumer savings, and a weakening labor market do not lay the foundation for sustainably higher prices.
A 25bps cut still places the Fed far from a neutral policy stance—one where rates neither stimulate nor restrain economic activity. As such, monetary policy continues to exert a tightening bias on the economy.
If an increasing number of job seekers are unable to find employment, how do they afford higher prices? The US economy is in for a tough ride—and many discerning investors would agree.
Source: First Sentier Investors, as of September 2025
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