Monetary Policy
▪ The FOMC announced yesterday it will cut the Federal Funds target rate by 25 bps to a range of 4.00 – 4.25%, the first policy rate change of 2025. This decision had become widely expected by the market prior to the meeting.
▪ Newly sworn in Fed Governor Stephen Miran was the lone dissenting vote in the 11-1 decision, favoring a 50 bps reduction in the rate. Miran is a White House economist who fills a term ending January 2026 that was unexpectedly vacated by Adriana Kugler in August.
▪ Changes to the Committee’s statement noted a heightened focus on risk in the labor market, reading that “downside risks to employment have risen” as unemployment and inflation have both moved up.
▪ In his press conference, Fed Chair Powell said that the economy is in a situation where there’s two-sided risk (referring to higher inflation and higher unemployment) with “no risk-free path” and that today’s decision could be thought of as a “risk management cut.” While noting a slowdown in the labor market, he emphasized that the recent rise in goods inflation can be largely attributed to tariffs and that most measures of inflation expectations remain well anchored.
▪ An updated summary of economic projections was released, revising projections from June and including the views of new members. The dot plot of interest rate forecasts now reflects a median of two additional rate cuts by the end of 2025 to 3.6% (down from 3.9%previously). The path of one cut a year in both 2026 and 2027 continues but is now 25 bps lower to 3.4% then 3.1%, respectively. A new 2028 projection holds the rate at 3.1%. The terminal rate remains at 3.0%.
▪ US markets opened with equities slightly down and Treasury yields slightly higher across the curve. The announcement and press conference did not result in meaningful change. The S&P 500 declined 10 bps and the 10-year Treasury yield rose 5 bps on the day.
Economic Conditions
▪ Median forecasts of key economic variables did not change dramatically from June. Officials project higher real GDP growth in 2025, increasing to 1.6% from 1.4%, with similarly slight upward revisions in 2026 & 2027. Longer run growth continues to be forecast at 1.8%.
▪ Year end 2025 PCE and Core PCE inflation estimates were left unchanged, at 3.0% and 3.1%, respectively. This is higher than the 2.7%and 2.9% reported in August. Projections show both figures declining to the Fed’s 2.0% target and remaining there in the longer run.
▪ Unemployment is projected to end 2025 at 4.5%, higher than the 4.3% unemployment figure from August. Forecasts edge down 4.2%out to the longer run.
The FOMC is next scheduled to meet October 28 – 29th, 2025.
Disclosures:
The views expressed herein are those of Asset Consulting Group (ACG). They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. This report was prepared by ACG for you at your request. Although the information presented herein has been obtained from and is based upon sources ACG believes to be reliable, no representation or warranty, express or implied, is made as to the accuracy or completeness of that information. Accordingly, ACG does not itself endorse or guarantee, and does not itself assume liability whatsoever for, the accuracy or reliability of any third party data or the financial information contained herein.
Certain information herein constitutes forward-looking statements, which can be identified by the use of terms such as “may”, “will”, “expect”, “anticipate”, “project”, “estimate”, or any variations thereof. As a result of various uncertainties and actual events, including those discussed herein, actual results or performance of a particular investment strategy may differ materially from those reflected or contemplated in such forward-looking statements. As a result, you should not rely on such forward-looking statements in making investment decisions. ACG has no duty to update or amend such forward-looking statements.
The information presented herein is for informational purposes only and is not intended as an offer to sell or the solicitation of an offer to purchase a security. Please be aware that there are inherent limitations to all financial models, including Monte Carlo Simulations. Monte Carlo Simulations are a tool used to analyze a range of possible outcomes and assist in making educated asset allocation decisions. Monte Carlo Simulations cannot predict the future or eliminate investment risk. The output of the Monte Carlo Simulation is based on ACG’s capital market assumptions that are derived from proprietary models based upon well-recognized financial principles and reasonable estimates about relevant future market conditions. Capital market assumptions based on other models or different estimates may yield different results. ACG expressly disclaims any responsibility for (i) the accuracy of the simulated probability distributions or the assumptions used in deriving the probability distributions, (ii) any errors or omissions in computing or disseminating the probability distributions and (iii) and any reliance on or uses to which the probability distributions are put.
The projections or other information generated by ACG regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Judgments and approximations are a necessary and integral part of constructing projected returns. Any estimate of what could have been an investment strategy’s performance is likely to differ from what the strategy would actually have yielded had it been in existence during the relevant period. The source and use of data and the arithmetic operations used for calculating projected returns may be incorrect, inappropriate, flawed or otherwise deficient.
Past performance is not indicative of future results. Given the inherent volatility of the securities markets, you should not assume that your investments will experience returns comparable to those shown in the analysis contained in this report. For example, market and economic conditions may change in the future producing materially different results than those shown included in the analysis contained in this report. Any comparison to an index is for comparative purposes only. An investment cannot be made directly into an index. Indices are unmanaged and do not reflect the deduction of advisory fees.
This report is distributed with the understanding that it is not rendering accounting, legal or tax advice. Please consult your legal or tax advisor concerning such matters. No assurance can be given that the investment objectives described herein will be achieved and investment results may vary substantially on a quarterly, annual or other periodic basis. There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information.
Gryphon Financial Partners shall not in any way be liable for claims and make no expressed or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in or omissions from them. This was created for informational purposes only. Gryphon Financial Partners, LLC is an Investment Adviser.