US-CHINA: Bessent-He Meet In Malaysia Next Week, Trump Sees Good Deal For Both

Below is a PDF comparison of the September FOMC statement vs the last edition in July. It describes a weaker labor market with job gains that "have slowed", with an unemployment rate that has "edged" up. 

• That's not really a surprise, but there are three surprises in the statement changes: one is that they have noted inflation "has moved up" as well as "remains elevated"; a second is that they add "judges that downside risks to employment have risen". A third is that they specifically mention "in light of the shift in the balance of risks", and adjusted the forward guidance to remove "the extent and timing of" additional "adjustments" to rates. Only the latter was a change foreseen by any analyst, but even only partially (Citi: To remove “and timing”).
• Not a surprise: Miran dissenting in favor of a 50bp cut.

• Treasury futures gapped higher before scaling back move after the FOMC cut the target rate by 25bp to 4.0%-4.25%. Fed Govs Miran dissented in favor of a 50bp cut.
• Tsy Dec'25 10Y futures currently trades +4 at 113-21.5 (113-08 low, 113-22 high).
• A bull-mode condition in Treasury futures remains intact. Note that the recent impulsive rally signaled an acceleration of the uptrend. Also, moving average studies are in a bull-mode position, highlighting a dominant uptrend. This suggests scope for an extension through 114-00 next and a test of 114-10, the Apr 7 high (cont). Initial firm support to watch is 112-28, the 20-day EMA.
• Curves rising off flatter levels: 2s10s +0.194 at 52.452, 5s30s -0.199 at 106.013
• Cross asset: Stocks mildly higher (SPX eminis +17 at 6684.5), Gold flat at 3690, Bbg US$ index retreats to 1185.57 (-3.33).

• Fed funds rate range maximum: 4.25%
• Number of dissenters to size of rate move: ONE. Miran preferred 50bp cut. The lowest dot, if Miran's, suggests he saw 50 bp cuts for Sept, Oct, Dec to end the year at 2.875%.
• Number of dissenters preferring a larger cut: ONE. Miran
• Median projection of fed funds rate at end-2025: 3.6%
• Median projection of fed funds rate at end-2026: 3.4%
• Median projection of fed funds rate at end-2027: 3.1%
• Median projection of fed funds rate at end-2028: 3.1%
• Median projection of longer run fed funds rate: 3.0%
• Number of 2025 dots > 4.125%: ONE
• Number of 2025 dots > 3.875%: SEVEN
• Number of 2025 dots < 3.875%: TEN
• Number of 2025 dots < 3.625%: ONE