Effective Federal Funds Rate

US personal income rose 0.4% month-over-month in July, unexpectedly expanding, while personal consumption expenditures slowed to 0.2% month-over-month, the lowest growth so far this year. The July PCE price index accelerated to 0.2% month-over-month and 3.7% year-over-year, and the core PCE price index also accelerated to 0.2% month-over-month and 3.3% year-over-year, but there is no overheating in price increases, and they may have passed their peak. This has strengthened expectations that the Federal Open Market Committee (FOMC) will hold the policy rate steady. On the 28th, Chair Warsh is scheduled to speak, with attention particularly on his remarks following Treasury Secretary Bessent's announcement of support for the Treasury market. According to a CNBC survey, 80% of experts said the Chair should present an economic outlook, and 77% believe the Treasury's bond market intervention will fail to lower long-term rates.

The Dow Jones Industrial Average was nearly flat today, with investors holding back on trading while awaiting Nvidia's earnings and a speech by Federal Reserve Chair Kevin Waller at the Jackson Hole symposium, which will mark his first address at this venue. The market was pressured by a higher-than-expected PCE index, which could prompt the Fed to accelerate interest rate hikes in October. However, the Dow edged up 12.67 points, or 0.02%, to 53,590.07. Meanwhile, the FedWatch Tool indicated that investors assign a 54.7% probability that the Fed will raise rates by at least 0.25% in October, up from 46.4% last week. On the data front, the U.S. Commerce Department reported that the overall PCE index rose 3.7% in July year-over-year, above the expected 3.6%, while core PCE increased 3.3%, in line with forecasts.

Minutes on the discount rate released by the Federal Reserve on the 25th showed that four of the twelve regional Federal Reserve banks supported a quarter percentage point increase in the discount rate in July. The four banks that backed the hike were Cleveland, Dallas, Minneapolis, and Kansas City. The Federal Reserve decided at the July 28 to 29 Federal Open Market Committee meeting to keep the target range for the federal funds rate at 3.50 to 3.75 percent, but Cleveland Fed President Hammack, Dallas Fed President Logan, and Minneapolis Fed President Kashkari argued for a quarter point rate increase and voted against holding rates steady. Kansas City Fed President Schmid does not have a vote at this year's FOMC meetings. The discount rate is the rate applied when financial institutions borrow funds directly from the Fed, and the minutes again showed that views within the Federal Reserve were divided over the appropriate level of interest rates.

UBS expects the Federal Reserve to leave interest rates unchanged despite competing pressures from a strained housing market and strong artificial intelligence investment. The Federal Open Market Committee voted 9-3 in July to hold the benchmark rate at 3.5% to 3.75%, with three regional presidents voting for an immediate increase. Thirty-year fixed mortgage rates have spiked to 6.66%, a one-year high, with a typical family now spending 34% of income on payments for a median-priced home, according to the National Association of Home Builders. Technology companies are expected to invest $820 billion in data centres this year, spending that UBS says is largely insulated from borrowing costs. Surging memory chip prices linked to AI demand have added 20 to 30 basis points to core inflation, UBS estimates, but the bank considers the effect a temporary bottleneck rather than broader overheating.

Investors face a pivotal 48-hour stretch this week with the release of the Federal Reserve's preferred inflation gauge, Nvidia's fiscal second-quarter earnings, and new Fed Chair Kevin Warsh's first Jackson Hole address. The July core PCE print, due Wednesday morning, is expected to hold at 3.3%, far above the Fed's 2% target, with a downside surprise reducing September hike risk and an upside surprise putting a hike back on the table. Nvidia reports after Wednesday's close with consensus revenue of $91.85 billion and EPS of $2.09, but the stock has declined after recent beats, making October-quarter guidance near $102 billion and gross margin around 73.5% the key metrics. Warsh speaks Friday at 10 a.m. at a symposium where 69% of fund managers expect a neutral tone, yet he leads a divided committee that saw three dissents in favor of a hike at the July meeting and has narrowed forward guidance.

The Federal Reserve's July meeting minutes revealed that many policymakers fear persistently elevated inflation could start to reshape business wage and price-setting behavior. The minutes noted that after 65 consecutive months of headline inflation above the Fed's 2% target, continued high inflation rates could begin to affect inflation expectations. This scenario would be a nightmare for Fed Chair Kevin Warsh, who has maintained a more optimistic stance on price stability. The central bank has left interest rates unchanged over its last two meetings, with three regional presidents dissenting in favor of a quarter-point hike. The minutes also highlighted that AI-driven price impacts have been limited to select categories, with most participants expecting AI to be disinflationary over time.

Neel Kashkari, president of the Minneapolis Fed, said the U.S. Treasury market is still functioning well and the recent surge in bond yields is unlikely to affect the Fed's monetary policy considerations. Speaking on CBS's Face the Nation, he said every signal indicates the market has liquidity and is trading normally, which allows the Fed to focus on its policy rate to bring inflation down. The 10-year Treasury yield closed last week around 4.73%, while the 30-year yield was near its highest level since 2007, but Kashkari pointed out that yields were significantly higher during the 1990s. At the Fed's latest meeting on July 28-29, the FOMC held rates at 3.50-3.75% for the fifth consecutive time, with three members including Kashkari voting for a 0.25% rate hike because of concern that inflation has been above the 2% target for more than five years. Investors are watching the Jackson Hole conference on August 27-29 and the speech by new Fed Chair Kevin Warsh on Friday, August 28, to assess plans for tackling inflation amid the surge in bond yields.

The U.S. Treasury Department announced on August 19 that it will double its purchases of long-dated Treasury bonds from $2 billion to $4 billion, a surprise intervention that complicates the Federal Reserve's inflation fight. Treasury Secretary Scott Bessent's move aims to push down yields on 10-, 20-, and 30-year bonds, which have surged to near multidecade highs amid above-average inflation, the removal of forward guidance by Fed Chair Kevin Warsh, and U.S. debt crossing $40 trillion for the first time. The intervention could lower corporate borrowing costs and mortgage rates, but it may force Warsh and the FOMC to raise the federal funds target rate to maintain price stability, especially as core PCE inflation shows the Iran war's price pressures have become entrenched. Warsh, sworn in on May 22, faces a dilemma: act against sticky inflation and risk angering President Donald Trump and halting the AI-driven stock rally, or do nothing and let inflation accelerate.

The US Treasury announced it will more than double the size of its buybacks of 10-year to 30-year government bonds, from 2 billion dollars to 4 billion dollars per operation, in an effort to pull down yields that had surged because of tensions in the Strait of Hormuz. The program will run from September 9 to November 4, 2026. After the announcement, US stocks recovered, with the Dow Jones and S&P 500 jumping while the Nasdaq was slightly lower. The 30-year bond yield eased to 5.196 percent after touching its highest level since June 2007, while the 10-year yield stood at about 4.647 percent. The move came amid concerns that the Fed could raise interest rates, after minutes from the July 2026 FOMC meeting showed three members supported a quarter-point rate increase. Goldman Sachs, however, said a Fed rate hike in this cycle is highly unlikely and expects rate cuts to be delayed until 2027.

The US Treasury announced on the 19th that, to curb the rise in long-term interest rates, it will raise the per-operation cap on liquidity-support buybacks of long-term nominal coupon Treasuries to at least double, at 4 billion dollars. In a television interview, Treasury Secretary Bessent cited the reason for the measure as the particularly thin market for 30-year bonds and yields not matching fundamentals, and also suggested the possibility of expanding buybacks depending on the situation. Meanwhile, Fed Chair Warsh supports a policy of reducing the number of FOMC meetings from eight to six per year and limiting communication with the market, indicating a stance that the market should lead policy. JPMorgan warned that the Treasury's measure is not a fundamental solution and could eventually push up the term premium and yields on long-term bonds. Concerns about a downgrade of the US sovereign credit rating have also emerged, and a downgrade could accelerate dollar selling. The dollar index has fallen below its 200-day moving average, suggesting a shift to a medium-term downtrend. Chair Warsh is scheduled to deliver a keynote speech at the 2026 Jackson Hole annual economic policy symposium hosted by the Kansas City Fed on August 28.

YLG Bullion International reported on the gold price trend for 20 August 2026, noting that gold closed up 188.46 dollars, or 4.34 percent, reaching its highest level in more than two and a half months. This came after the US Treasury doubled the size of its long-term bond buybacks to at least 4 billion dollars per operation, starting 9 September, to boost liquidity in the long-term bond market. As a result, the 30-year bond yield fell nearly 10 basis points and the dollar weakened, strongly supporting gold prices. Meanwhile, the Federal Reserve meeting minutes had a hawkish tone, with several members ready to raise rates if inflation remained high, but the market still assigned a 65 percent probability that the Fed would hold rates in September. YLG assessed that gold's sharp rally into overbought territory, along with bearish divergence on the 4-hour chart, could risk a short-term pullback. It recommended buying if the price pulled back to the 4,450 to 4,400 dollar area, and selling to take profit if the price failed to break above 4,527 dollars, or waiting to sell at 4,575 to 4,596 dollars if that resistance was breached.

The baht is expected to move in a range of 32.60 to 33.00 per dollar today after the US Treasury announced it would at least double the size of its long-term bond buybacks, pushing US bond yields lower and weakening the dollar index. Siam Commercial Bank's financial markets group estimates a range of 32.75 to 33.00 per dollar, while TTB's money market and international transactions division said the baht opened this morning at 32.85 per dollar, strengthening from yesterday's close of 33.06 per dollar. The US Treasury will raise the maximum size of buybacks for 10- to 20-year and 20- to 30-year bonds from 2 billion dollars to at least 4 billion dollars, effective from September 9 through November 4. Minutes from the Federal Reserve's July meeting showed several policymakers were concerned about inflation and might need to raise rates if inflation does not fall toward the 2 percent target, but CME Group's FedWatch Tool indicated investors see a 65 percent chance the Fed will hold rates at its September 15-16 meeting because US economic data have been weak. Foreign investors yesterday sold a net 8.699 billion baht of Thai stocks and bought a net 1.09 billion baht of Thai bonds.

President Donald Trump again attacked the Federal Reserve's interest rate policy on Wednesday, saying strong economic data should not be a reason for the Fed to delay rate cuts, and that the United States should have borrowing costs far below current levels. Trump accused some Fed governors appointed under former Presidents Barack Obama and Joe Biden of possibly having political motives in rate decisions, but exempted Kevin Warsh, the Fed chair he nominated early this year, saying Warsh is doing an excellent job after taking office in May, succeeding Jerome Powell, who remains a Fed governor. Trump called on the Fed to cut rates further to support economic growth and help reduce the government's financing costs, as US government debt approaches 40 trillion dollars. He noted that in the past, when the US reported strong economic figures, interest rates often fell, but now the opposite is happening. Trump's comments came the same day the Federal Open Market Committee released minutes of its July meeting, which showed many Fed officials saw rates possibly needing to stay high if inflation did not show enough progress in slowing. Although inflation data released after that meeting were broadly better, annual inflation remains above the Fed's 2 percent target. Meanwhile, the US economy grew at an annual rate of just 1.5 percent in the second quarter, below market expectations and down from 2.1 percent growth in the first quarter. Trump also voiced displeasure with US interest rates compared with other countries, especially Switzerland, where the policy rate is near zero. He said Switzerland has a rate of about 0.5 percent while the US pays about 3.5 percent, and said he has the right to cut business ties with a country like Switzerland. However, Trump said he does not see the US facing a bond market problem, even though he views the rates the country pays as unfairly high. Before Trump's comments the same day, the US Treasury announced an increase in the size of its government bond buyback program after long-term yields rose sharply, with the buybacks focused on bonds maturing in 10 years or more, amid pressure in the long-term bond market and concerns about rising government borrowing costs.

The US Treasury announced it will raise the per-operation cap on liquidity-support buybacks of long-term nominal coupon-bearing Treasuries to at least double, at $4 billion. The operations will run from September 9 through November 4. Investors have expanded short positions in long-term bonds amid sticky inflation from the energy shock caused by the US-Iran conflict and rising federal debt. With the US 30-year yield reaching its highest level since 2007 and Germany's 30-year federal bond yield hitting its highest since 2011, the global rise in long-term interest rates had been flagged as a market risk. The Treasury's move amounts to an adjustment of long-term yields that the Federal Reserve cannot control. In the Federal Open Market Committee meeting held on July 28 and 29, minutes released on the 19th showed participants judged inflation risks were tilted to the upside, and many noted that further rate hikes could be needed if inflation does not slow. Although the latest inflation data released after that meeting show signs of cooling, and employment and consumption also suggest a slowdown, rate-hike expectations have only temporarily receded and remain persistent. While the Treasury's response is expected to curb long-term rates in the short term, there are concerns that the effect may prove short-lived.

Even after coordinated Japan-US intervention, the dollar-yen pair has returned to yen weakness, with concerns over Japan's fiscal situation and higher crude oil prices driven by Middle East tensions supporting dollar strength and yen weakness. The dollar-yen rate, which was around 164 yen just before the intervention, strengthened to around 155.20 yen on August 3, then retraced half of that move to weaken back to around 159.60 yen. Finance Minister Satsuki Katayama stated clearly that she would not hesitate to carry out additional intervention, but with no intervention seen since then, market caution has eased for the time being. Japan's newly issued 10-year yield briefly rose to 2.945 percent, a level not seen in 30 years, while the US 30-year bond also briefly reached the 5.3 percent range, a level not seen in 19 years. US Treasury Secretary Scott Bessent may take some kind of action, and with the dollar-yen approaching 160 yen and long-term yields in both Japan and the US at high levels, it seems wise to stay prepared for yen-buying intervention moves. In addition, Treasury Secretary Bessent does not accept the Takahashi administration's combination of aggressive fiscal policy plus monetary easing as a package, and appears to be requesting coordinated intervention together with a Bank of Japan rate hike as a set. With April-June GDP coming in below expectations, there is also a scenario in which the Bank of Japan becomes cautious about a September rate hike, and if the impression of a cautious stance on rate hikes prevails, yen weakness could gain momentum.

The Federal Reserve's next rate move has become more complicated as inflation remains above target while economic growth stays resilient. Former St. Louis Fed President Jim Bullard argues the Fed should use current economic strength to raise rates, while SoFi strategist Liz Thomas says tightening would do little to fix supply-driven inflation. Thomas characterized inflation as warm rather than hot and does not expect a rate increase at the Fed's September or October meetings, with December the earliest realistic possibility. Bullard sees the strong economy as an opportunity to fight inflation, noting that economic activity and the labor market remain solid. Markets are now assigning roughly a 25% to 30% probability of a September rate move, down from more than 50% following softer inflation and employment reports. Bullard warned that the Fed's preferred core PCE inflation gauge could still finish 2026 above 3%, far from its 2% objective, which would lead markets to say the Fed has abandoned its inflation target.

YLG estimates that on August 17, 2026, gold bullion will move in a range of $4,311 to $4,363 per ounce. Domestic 96.5% gold bullion sold at 68,250 baht per baht-weight, down 500 baht from the previous day. Pressure came from military and economic tensions with Iran, while U.S. Treasury Secretary Scott Bessent announced unprecedented sanctions to be imposed next week, and Cleveland Fed President Beth Hammack affirmed that the Fed should raise rates immediately. However, July producer price index growth slowed to 4.7%, below expectations, and jobless claims rose, causing CME Group's FedWatch Tool to indicate a 65.6% probability that the Fed will hold rates at 3.50% to 3.75% at its September meeting, up from 45.0% the previous week. Meanwhile, the Bank of Korea returned to investing in the SPDR Gold Trust for the first time in 13 years, with a value of about $250.4 million at the end of the second quarter of 2026. Today's strategy is to open long positions if the price does not break below $4,300, but if it does, delay buying until $4,230 to $4,166, and take profit if the price fails to break above $4,402.

The US Commerce Department announced on the 14th that July retail sales came in at 763.602 billion dollars on a seasonally adjusted basis, down 0.6% from the previous month, missing market expectations for a 0.1% increase. This was the first decline in nine months, and the largest drop in one year and two months since the 1.1% fall in May 2025. Core retail sales, which exclude autos and auto parts, also fell 0.3% month-on-month, marking a second straight monthly decline and defying market expectations for a 0.2% rise. The control group, which excludes gasoline stations, autos and auto parts, building materials, and food services and drinking places, fell 0.4% from the prior month, so it is expected to weigh on personal consumption in the April-June quarter GDP. In the market, the view is spreading that the Federal Open Market Committee will keep the policy rate unchanged in September and October, and that a rate hike will come in December at the earliest.

This week in ASEAN, Thailand and Myanmar are deepening energy cooperation by discussing the renewal of a gas purchase agreement from existing sources and studying investment in new petroleum fields such as A6, while preparing a new memorandum of understanding covering exploration, production, gas trading, and power grid interconnection. Meanwhile, the Philippine central bank has not ruled out further interest rate hikes even though the latest quarterly GDP grew only 2.3 percent, the lowest in ASEAN. Singapore has raised its 2026 GDP forecast to 4.5 to 5.5 percent from the previous 2 to 4 percent, supported by global AI investment that helped the manufacturing sector expand 12.5 percent. The Philippines plans to borrow about 3.3 trillion pesos, or 54 billion dollars, in 2027, equivalent to 46 percent of the budget, to stimulate the economy. At the same time, SpaceX's Starlink has begun accepting orders for satellite internet service in Vietnam, with starting fees of 1.13 million dong, or about 43 dollars per month. Vietnam's central bank also warned that a funding gap of about 76.8 billion dollars could pressure liquidity, interest rates, and the currency.

Wall Street is rapidly backing away from another Federal Reserve rate hike after fresh signs that the U.S. consumer is losing momentum. The probability of a 25-basis-point increase at the Fed's September meeting fell to 28.6% Friday, leaving investors increasingly positioned for rates to remain at the current 3.50% to 3.75% range. The shift followed a surprisingly weak July retail-sales report, which showed a 0.6% decline from June, the first drop in nine months and biggest in 14 months, badly missing economists' expectations for a 0.1% increase. Consumer confidence weakened at the same time, with the University of Michigan's preliminary August sentiment index dropping to 51.0 from 55.2 in July. July CPI rose just 0.1% month over month and 3.4% from a year earlier, while producer prices were unchanged after declining 0.1% in June. Fed-funds traders now assign a 71.4% probability to no change on Sept. 16, up sharply as hike odds have fallen from 50% one month ago.

Gold prices edged higher on Friday as concerns of an immediate U.S. interest rate hike eased following soft economic data, even as the U.S.-Iran standoff over the Strait of Hormuz fueled oil-linked inflation worries. Front Month Comex Gold for September delivery rose $22.20, or 0.51%, to $4,393.60 per troy ounce, while Front Month Comex Silver for September delivery inched up $0.132, or 0.20%, to $65.125 per troy ounce. The Middle East crisis continues with no rapprochement between the U.S. and Iran, and the Strait of Hormuz remains closed, virtually halting shipping traffic in the region. Two tankers owned by Abu Dhabi National Oil Company of the United Arab Emirates came under drone attack by Iran while transiting the strait, pushing oil prices higher and rattling global economies. Recent U.S. data showed non-farm payrolls fell by 23,000 in July versus expectations of an 80,000 increase, and retail sales fell 0.60% month-on-month in July, sharply missing forecasts for a 0.10% rise. According to the CME Group's FedWatch Tool, traders now see only a 32.60% chance of a 25-basis-point rate hike by the Federal Reserve at its September 15-16 meeting, down from above 50% last week.