TENCENT-R

A 25bp hike to 3.75%-4.00% after three years is late and dangerous. Dots pointing to more tightening while Trump wants 1% creates political pressure. If the Fed overtightens now, it risks breaking credit and triggering a Q4 slowdown.

The dots in the 2027 plot are interesting as there were actually 3 members projecting rate cuts to 3.5%-3.75% and one projecting 3-3.25% (!) in 2027 while the rests opined target range to be either 4.00%-4.25% or 4.25%-4.5%. The accompanying SEP projected PCE inflation to fall from 3.7% at end 2026 to 2.3% by end 2027. Should this happen, the dot plots for the later years projected fed fund rates to move towards the mid 3% range by 2029. 🤔

I think it's great that the stock market has stabilised even after rate hike, with most of the negativity having already priced in the past few trading days leading up to FED's decision. FED's stance looked really firm for the first time since Warsh took over, with clear signals that there might be a really good chance of 1 more hike come end of year.

The drop and recovered was within the weekly expected price range. However, personally it means that the market has not yet been to extreme fear where proper good news rallies the market. So it means we have not yet have correction/ crisis pullback. Be cautious and DCA into your stock as more money is lost in timing the market. Stay safe and do your own research before investing.

Fed chair just did a u-turn because he realized his previous 2 talks contain no weight…

So the expected hike happened. Good for USD holders. No major surprise for the markets. A little break before the earnings season resume.

last night the Federal Reserve decided to increase the interest rate of 0.25% , Signal that at least one more rate hike before the end of 2026. Next year what interest rate will be?

The Fed’s 25bp hike to 3.75%–4.00%, alongside broad expectations for another increase, signals continued concern over persistent inflation and economic resilience. Chair Warsh’s reference to Middle East tensions also highlights geopolitical risks that could affect inflation, particularly through energy prices. Higher-for-longer rate expectations may support Treasury yields and the U.S. dollar while increasing valuation pressure on rate-sensitive assets. Markets will likely focus on incoming inflation, employment and economic data to assess whether further tightening is warranted.

For me, the bigger story is not the 25bp hike itself, but how firmly the Fed is signalling that rates may stay higher for longer. A unanimous 12-0 decision, together with 16 of 18 officials still seeing at least one more hike this year, tells me inflation remains the key concern despite the growing pressure from the White House. Trump calling for rates at 1% or lower is a very different message from the Fed’s current stance, which makes the question of central-bank independence even more important for markets.

I am not changing my long-term AI and semiconductor thesis because of one rate hike, but I am becoming more selective about adding. Higher-for-longer rates can pressure high-valuation growth stocks and increase volatility, so I would rather use sharp pullbacks to accumulate quality names gradually instead of chasing strength. For me, this is a period to stay patient, manage position sizes, and let the market give me better entry points.

Fed had resisted hike long enough. market don't think they can resist longer. a 25bp hike in the near term may allow economists to assess it's effectiveness in the current environment. Separately, Walsh may be in a conundrum.. presumably he wouldn't want to upset Trump too much by being freely hawkish. at least that's what I hope.