MARKET UPDATE

This morning equity markets ticked lower and Treasury yields held steady with the 10-year yield trading modestly above 5.25%.  The latest CPI data continues to remain stubbornly above the Fed's 2% target with the latest numbers coming in at consensus expectation.  On the other hand, recent jobs and unemployment data have continued to weaken over recent months.  All three fall 2025 FOMC meetings resulted in 25bps cuts, and until this fall the Fed had held rates steady, with no change in 2026 until the September 25bp hike.  The latest forecast materials suggest that the target rate will continue to move modestly higher over the remainder of 2026.  The Fed continues to observe the economic data and emphasize that their focus is on maintaining the dual mandate of 2% inflation and full employment.  The FOMC prefers to be patient before moving rates, as they observe the available data on those two key metrics in today's dynamic economic environment.  Notable topics at this point in the current economic cycle are the length of and economic impacts from the conflict with Iran, as well as recent global trade policy changes.  The FOMC will continue to observe and discuss how these events and the current rate level, impact inflation and employment in the US.  

- CMS Staff