Bloomberg Surveillance Instant Reaction: The Fed Decides
Sep 17, 2025
Greg Peters, a fixed-income strategist at PGIM, shares his insights on the Fed's recent 25 basis point cut. He discusses the dynamics of the yield curve and why investors are gravitating toward intermediate positions. The conversation delves into whether the Fed will initiate a series of cuts or a one-off adjustment, alongside implications for bond and FX markets. Peters emphasizes the challenges of mixed economic data and increasing inequality, and how these factors may influence future Fed credibility and strategies.
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Fed Cuts But Keeps Inflation Sticky
- The Fed cut 25 bps and signaled more cuts this year while keeping inflation forecasts sticky around 3%.
- That mix prioritizes growth risk-management over immediate inflation suppression.
Dot Plot Shows Wide Disagreement
- The new dot plot projects more cuts this year but shows wide dispersion for 2026, signalling low committee conviction.
- Markets are pricing more aggressive easing than the Fed's median, creating tension.
Don’t Sit In Cash, Use Intermediate Bonds
- Avoid sitting in cash; prefer intermediate-term bonds with higher credit quality to earn yield.
- Expect volatility and avoid going super long on duration.