The trading firm QCP Capital has released a new report analyzing the shift in sentiment in financial markets — from panic to strategy reassessment. The company's analysts note that data on the Personal Consumption Expenditures (PCE) index will now dictate the shape of the yield curve, rather than the overall monetary policy stance.
The Fed has cut rates by 25 basis points
Federal Reserve Chair Jerome Powell characterized the rate cut as risk management amid weakening labor market dynamics. The 25 basis point reduction has reopened the path to policy easing; however, committee members' forecasts indicate only a cautious approach to rate cuts.
Experts at QCP Capital emphasize that with stable activity and core inflation around 3%, the easing cycle looks questionable unless clear signs of economic growth slowdown appear. #ФРС leans towards supporting employment but will act cautiously in light of stable disinflation, tariff uncertainties, and the risk of credit stimulation amid economic strength.
A new perspective on the fair rate
Fed Governor Stephen Miran argues that the policy remains too restrictive regarding the lower neutral rate. In his view, demographic factors, immigration, and other structural forces anchor the fair federal funds rate at around 'mid-2%' — significantly lower than current levels. This suggests that the barrier for additional cuts may be lower than what the committee members' forecasts indicate.
Long-term interest rates have risen under pressure from increased risk premiums and excess bond supply, despite short-term rates stabilizing at new levels following the Fed's decision. Stocks have reached new highs. Gold briefly exceeded $3,700 per ounce, but then pulled back.
The dollar is strengthening amid uncertainty
The U.S. dollar strengthened along with Treasury bonds, raising the question of whether the massive short position on the dollar has finally ended. The decline of USD in the first half of 2025 reflected capital flows, policy divergence, and management issues. After the first rate cut has already occurred, and Europe and Japan no longer show clear superiority in economic indicators, the risk of a dollar reversal becomes real.
QCP Capital continues to see the dollar weak by the end of the year due to divergences in monetary policy across different countries and expectations of further easing from the Fed. However, the rebound of the American currency after the Fed meeting last week shows that the exchange rate will be unstable.
Gold and bitcoin are in focus for investors
Gold has reached record highs, reflecting investors' doubts about the Fed's ability to return to a tight policy. This supports increased demand for safe assets. Bitcoin follows a similar logic, although its fluctuations are much sharper.
Consumer spending in the U.S. remains stable despite discussions about new tariffs, and companies have replenished their inventories. The labor market is showing cautious behavior — employers are not rushing to hire, but layoffs are also happening slowly. This does not indicate serious problems in the economy.
Rate cuts give the Fed time to analyze the situation but do not address the fundamental issues of public finances. The U.S. Treasury will have to rely more on short-term bills and adjust borrowing structures, which will support increased yields on long-term bonds.