The week of central banks hasn’t brought much surprise to investors.

Starting with the Japanese central bank, in line with expectations, it has kept its official interest rate at 0.5%. Still, there was something that initially spooked the markets: the announcement that it would begin selling ETFs worth around ¥330 billion per year, along with real estate funds (J-REITs) worth ¥5 billion.

Later, as Kazuo Ueda mentioned, the bank could resume rate hikes if its economic and inflation forecasts hold, the yen strengthens, and government bond yields rise. If this trend continues, it could trigger capital outflows from U.S. markets to Japan, leading to a correction in the S&P 500, Dow Jones, and other indices.

The Bank of England also kept rates unchanged — at 4%. Although inflation remained high in August, at 3.8% year-on-year, and is expected to rise again in September, policymakers are betting on a gradual decline toward the 2% target. This suggests that rate cuts are unlikely in the short term, supporting the GBP/USD pair.

Finally, the Fed did exactly what the markets had anticipated: cut rates by 25 basis points to between 4.0% and 4.25%, citing emerging tensions in the labor market. The only dissent came from Stephen Miran — appointed under Trump and a Fed member until February 2026 — who advocated for a deeper cut of 50 basis points.

What cheered the mood was that the rate forecasts for 2025 were revised downward from 3.9% to 3.6%, implying at least two more cuts. For 2026, the forecasts were lowered from 3.6% to 3.4%. On top of that, GDP growth forecasts were revised upward: 1.6% for 2025 (up from 1.4%) and 1.8% for 2026 (up from 1.6%).

The only drawback was that inflation expectations for 2026 rising 0.2 points to 2.6%. 

As for why the Fed’s monetary policy outlook is now more dovish despite ongoing pricing pressures: on one hand, the central bank must support full employment; on the other, there may be hopes that the impact of tariffs won’t be short-lived. There’s also a chance the Fed gave in to pressure from Trump.

The latter theory gains weight from the fact that, despite the Fed’s dovish stance, Treasury yields still rose.

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