Week in review

• U.S. Federal Reserve raised policy rate by 25bps to 3.75%-4.00%
• Bank of Japan raised policy rate by 25bps to 1.25%
• China Aug retail sales rose by 0.4% y/y, YTD FAI declined by 7.2% y/y

Week ahead

• Australia Aug employment data
• U.S. Sep flash PMI data
• China Sep loan prime rates

Thought of the week

The Fed delivered a unanimous 25-basis-point rate hike to 3.75%-4.00%, its first increase since July 2023, reaffirming that inflation remains the overriding policy concern. Updated FOMC projections point to one more hike before year-end, with rates expected to stay elevated into 2027. Growth and employment forecasts were nudged modestly higher while inflation is projected to ease only gradually, broadly consistent with a soft-landing path. Chairman Warsh’s more proactive stance on bringing inflation back to target was a notable signal from this meeting. With no immediate signs of inflation relief, particularly given ongoing tensions in the Middle East, the Fed may need to continue tightening to achieve its mandate. On the investment side, higher yields are making fixed income more attractive from a total return perspective, though near-term volatility at the long end from fiscal concerns and issuance warrants some caution. On equities, the combination of elevated rates and stretched valuations in parts of the market suggests a more selective approach is needed, with opportunities in rate-resilient sectors and international markets where valuations remain more undemanding.

Federal funds rate expectations

Market expectations for the fed funds rate

Source: Bloomberg, FactSet, U.S. Federal Reserve, J.P. Morgan Asset Management.
*Market expectations are based on overnight index swap rates. Federal Reserve projections shown are the median estimates of Federal Open Market Committee (FOMC) participants. Data reflect most recently available as of 16/09/2026.

All returns in local currency unless otherwise stated.

Equity price levels and returns: Levels are prices and returns represent total returns for stated period.

Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.

Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.

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