The central bank will raise the foreign currency deposit reserve requirement from 15 November. Nomura estimates the move could absorb 24 billion dollars of long-term onshore foreign currency liquidity and believes the policy is focused on slowing the pace of appreciation.
Long-term US forward rates recently retreated after reaching 5.2%, close to the peak policy rate of the previous tightening cycle. Goldman Sachs says when markets confirm that the current cycle of rate hikes is over will affect whether forward rates can fall further.
The central bank has launched a third round of the Securities, Funds and Insurance Companies Swap Facility and cut the interest rate on relending for share repurchases and stake increases. Nomura believes the policies show concern about sustained stock-market declines and leverage risks, but says their impact should not be overstated because both tools have been in place for two years.
From 2 November, the overnight reverse repo rate replaces the 7-day rate as the policy benchmark. Goldman Sachs believes the adjustment will allow more flexible liquidity provision and reflects policymakers’ focus on credit risk.
The overnight reverse repo rate has been set at 1.25%, replacing the 7-day operation rate as what Nomura considers the main policy anchor. The operating corridor has moved down by 15 basis points, signaling greater tolerance for ample liquidity, but the change in tenor itself will not automatically lead to a reduction in the LPR.
US third-quarter GDP growth rose to an annualized 3.4% from the previous quarter, supported by both AI investment and consumer spending. Morgan Stanley believes productivity gains allow the economy to accommodate faster growth, but an oil price shock and a broadening of demand could alter the rate-hike path.
US core inflation remains high, while investment and consumption support third-quarter growth. Nomura believes that after pausing rate hikes in October, the Fed will hike once more in December and hold rates steady throughout 2027.
BofA expects the Bank of Japan to hold its interest rate at 1.25% in October and judge for the first time that underlying inflation has broadly reached its 2% target. The bank still expects a rate hike in December, but markets have already priced in considerable tightening.
The Federal Reserve kept rates at 3.75%–4.00%, with two officials favoring a hike. Markets read the meeting as slightly dovish but still bet on a hike in December; Morgan Stanley expects fewer subsequent hikes than markets have priced in.
Citi expects the Fed to hold rates steady in October, but Chair Warsh may continue to signal that the hiking cycle is not over; the bank’s forecast for a December hike differs from the market pricing shown in the report.
The Federal Reserve held interest rates unchanged in October after its previous hike. Goldman Sachs believes the meeting language and the chair’s remarks support a pace of hikes at every other meeting, but another hike next March remains possible if inflation exceeds the bank’s expectations.
The Federal Reserve held rates steady while the Bank of Canada raised them. Goldman Sachs expects the next rate hikes in both the US and Europe in December, while also monitoring the US midterm elections and returns on AI investment.
Goldman Sachs believes tariffs, the energy shock and mismeasurement of AI prices together explain the current core inflation overshoot. Its baseline calls for two rate hikes, followed by cuts to 3.25%–3.5%.
Goldman Sachs expects the Federal Reserve and the European Central Bank to pause rate hikes this week and raise rates again in December. US household demand for equities will remain robust in 2027, but depends on employment, wealth, and competition from cash and bond yields.
Goldman Sachs expects the Federal Reserve to raise rates at every other meeting, completing the second and final hike of this cycle in December. Markets still price in roughly four hikes in total; the disagreement centers on whether tariff, energy and AI-related price pressures can ease in 2027.
Citi interprets falling stock prices, widening credit spreads and declining Treasury yields as signs that markets are assigning a higher probability to a slowdown in AI spending. The bank still expects a rate hike in December, but the buffers provided by consumption and housing are weakening, and further stock market declines could change the policy direction.
US stocks fell as Treasury yields declined. BofA believes markets are worried about whether AI investment can be converted into profits. Risk aversion raises the bar for a Federal Reserve rate hike in October, but the energy shock and underlying inflation still support further tightening; the European Central Bank is more likely to wait, while the Bank of England faces more immediate pressure to act.
Wages, consumption and corporate credit are strengthening together. Goldman Sachs has raised its growth forecasts for Taiwan for this year and next, and expects rate hikes of 12.5 basis points in each of three consecutive quarters. Capital outflows are weighing on the New Taiwan dollar in the short term, but the medium-term outlook remains positive.
Nomura expects the Fed to hold rates steady in October and raise them by another 25 basis points in December. A rebound in inflation still supports tightening, but downward revisions to historical data, credit pressures and housing weakness reduce the urgency to act immediately; third-quarter growth is supported by consumption and business investment.
Barclays expects the Bank of Japan to keep its policy rate at 1.25% in October while upgrading its assessment of underlying inflation to broadly consistent with the 2% target. Financial conditions remain accommodative, supporting subsequent rate hikes every three to four months, but weaker domestic demand and a subsequent decline in inflation limit the room for tightening.
