Summary view

The decision is mildly dovish in the near term yet structurally cautious for the medium term. Markets will likely interpret it as supportive for risk assets, although the path ahead remains uneven.

Hawkish or dovish

The cut itself is dovish because it confirms the Fed’s willingness to continue easing despite still-sticky services inflation and a labour market that has cooled but not cracked. A sixth cut signals that the policy bias remains on growth support rather than inflation containment.

However, the Dot Plot introduces a hawkish undertone. The dispersion is unusually wide, reflecting internal uncertainty about how much slack will actually emerge in 2026. The median showing only one cut implies that the Fed wants markets to temper expectations of a rapid return to ultra-loose policy. That anchoring effect is hawkish relative to what markets had priced in (roughly two cuts).

In short: near-term dovish, forward-guidance hawkish.

Interpretation of the cut

This move shows the Fed prioritises pre-emptive stability. Growth indicators have softened, credit conditions remain tight in certain segments, and the lagged effects of previous hikes are becoming more visible. Cutting now keeps real rates from drifting too restrictive as inflation moderates.

Yet the Fed is signalling it will not chase a full easing cycle unless the data compels it. This stance seeks to avoid reigniting inflation expectations, especially in services and housing.

Can risk assets continue rising

Broadly yes, but with moderation.

1. Equities

Lower rates support valuation multiples, and liquidity conditions improve as long as economic data does not deteriorate sharply. Mega-cap tech and AI beneficiaries should continue to enjoy flows.

However, the hawkish slope of the 2026 path caps the upside. Markets may grind higher rather than surge.

2. Bonds

Front-end yields fall further, but the long end may stay choppy because the Dot Plot limits expectations of a deep future cycle. Still constructive for duration traders.

3. Crypto, gold, silver

Real-rate drift lower is supportive, especially with geopolitical and fiscal uncertainty. Momentum remains intact unless the Fed pivots back toward restrictive guidance.

4. FX and EM assets

A slower easing path limits USD weakness, so the rally in EM assets may be selective rather than broad-based.

Overall

The signal is: Fed comfortable easing now, cautious later. Markets can still rise from here, but the pace is likely steadier, with data dependency dominating sentiment.