EconoTicker

The Fed lowered its policy rate by 25bps, with a narrow majority of officials projecting at least three rate cuts this year. Notably, the lowest dots imply up to ~150bps of total easing, highlighting the dovish tilt in the outlook.

Market impact: Negative for USD, supportive for equities and bonds, as expectations shift toward a more aggressive pace of rate reductions.

Historical context: This marks the first policy cut since 2020, and the dot plot’s range reflects unusually wide divergence in Fed views, from gradual to accelerated easing paths.

• Interest Rate Projection (Current, Q3): 3.6% (vs. 3.9% prior)
• 1st Yr Projection: 3.4% (vs. 3.6% prior)
• 2nd Yr Projection: 3.1% (vs. 3.4% prior)
• 3rd Yr Projection: 3.1% (unchanged)
• Longer-Run Projection: 3.0% (unchanged)

Market impact: Slightly negative for USD, as the downward revisions signal a softer policy outlook, aligning with expectations of gradual easing into 2026.

Historical context: This marks the second straight quarter of downward revisions, reflecting the Fed’s growing confidence that inflation is moderating and policy can return closer to neutral levels.

• Federal Reserve Interest Rate Decision: -25bps, bringing the policy rate down to 4.25%, in line with market expectations.

Market impact: Neutral-to-supportive for risk assets, as the cut was well telegraphed. Slightly negative for USD, while equities and bonds may benefit from easier policy.

Historical context: This marks the Fed’s first rate cut since 2020 (pandemic response), signaling a shift toward easing as inflation cools and growth risks rise.

• Building Permits (Aug): 1.312M (vs. 1.370M prior, 1.362M expected) | MoM: -3.7% (vs. -2.2% prior)
• Housing Starts (Aug): 1.307M (vs. 1.370M prior, 1.429M expected) | MoM: -8.5% (vs. +3.4% prior)

Market impact: Negative for USD, as the steep drop in both starts and permits highlights a cooling housing sector under pressure from high mortgage rates.

Historical context: Housing starts fell to their lowest since mid-2023, reversing the recovery trend seen earlier this summer.

• MBA 30-Year Mortgage Rate: 6.39% (vs. 6.49% prior)
• MBA Mortgage Applications (WoW): +29.7% (vs. +9.2% prior)
• Purchase Index: 174.0 (vs. 169.1 prior)
• Mortgage Market Index: 386.1 (vs. 297.7 prior)
• Refinance Index: 1,596.7 (vs. 1,012.4 prior)

Market impact: Supportive for housing sentiment, as lower mortgage rates spurred a surge in refinancing and fresh applications. Neutral for USD, though stronger housing demand could add to inflation persistence.

Historical context: Mortgage activity jumped to its highest since early 2022, highlighting pent-up demand being released as borrowing costs retreat from cycle highs.

• 20-Year Bond Auction: 4.613% (vs. 4.876% prior), reflecting lower borrowing costs for long-term U.S. debt.

Market impact: Slightly negative for USD, as easing yields suggest strong investor demand for Treasuries, reducing return appeal but supporting bond market stability.

Historical context: The 20-year yield has retreated from cycle highs near 5% seen in late 2023, signaling moderating long-term rate pressures.

• Atlanta Fed GDPNow (Q3): +3.4% (vs. +3.1% prior & expected), pointing to stronger near-term U.S. growth prospects.

Market impact: Supportive for USD, as the upward revision signals resilient economic momentum, potentially reinforcing the Fed’s cautious stance on rate cuts.

Historical context: The GDPNow tracker has consistently projected growth above 3% through Q3, underscoring stronger-than-expected activity compared with earlier forecasts in 2024.

• Inventories: +0.1% (vs. +0.1% prior, -0.1% expected), showing stable stock levels with a slight positive surprise versus expectations.

Market impact: Neutral for USD, as steady inventory growth indicates balanced supply conditions without adding strong momentum to GDP.

Historical context: Inventory changes have hovered around flat through 2024, reflecting cautious stock management in line with moderate demand.

• NAHB Housing Market Index (Sep): 32 (vs. 33 prior, 32 expected), pointing to persistently subdued builder confidence.

Market impact: Slightly negative for USD, as weak sentiment reflects the drag from high mortgage rates and affordability pressures in the housing sector.

Historical context: The index remains near multi-year lows, well below the neutral 50 level, underscoring prolonged challenges in U.S. housing despite resilient demand in some regions.

• Business Inventories (MoM, Jul): +0.2% (vs. +0.2% prior & expected), showing steady stock accumulation.

Market impact: Neutral for USD, as stable inventory growth suggests balanced supply chains, though limited contribution to GDP momentum.

Historical context: Inventory growth has hovered around 0.2% for much of 2024, reflecting cautious restocking amid moderate demand conditions.

• Capacity Utilization (Aug): 77.4% (unchanged)
• Industrial Production (YoY, Aug): +0.87% (vs. +1.27% prior)
• Industrial Production (MoM, Aug): +0.1% (vs. -0.1% prior, -0.4% expected)
• Manufacturing Production (MoM, Aug): +0.2% (vs. -0.2% prior, -0.1% expected)

Market impact: Slightly supportive for USD, as modest gains in factory activity suggest stabilization after recent weakness, though overall momentum remains subdued.

Historical context: Industrial output growth has slowed compared with early 2024, but the back-to-back monthly increases in manufacturing point to gradual recovery signs in the sector.

• Redbook Retail Sales (YoY): +6.3% (vs. +6.6% prior), indicating a modest deceleration in same-store sales growth.

Market impact: Neutral for USD, as retail momentum remains solid but the slight slowdown suggests consumer spending may be cooling from recent highs.

Historical context: Growth remains well above the 2022–23 average, highlighting resilient U.S. consumer demand despite elevated borrowing costs.