EU Crackdown Uncovers €47M in Digital Piracy Payments as Criminals Turn to Crypto

The manager turned first to an overview of broad market developments during the intermeeting period. Market participants left their macroeconomic outlooks little changed, and they appeared to continue to interpret data made available over the period as consistent with a resilient economy. In line with the stable outlook, investors' expectations for the path of the policy rate, whether market based or survey based, were virtually unchanged over the period. Investors expected a 25 basis point lowering in the target range for the federal funds rate at the October meeting and another 25 basis point lowering at the December meeting, although some uncertainty around the December meeting was evident in responses to the Open Market Desk's Survey of Market Expectations (Desk survey) as well as in market prices. The manager turned next to developments in Treasury markets and market-based measures of inflation compensation. Treasury yields were little changed, on net, over the period, consistent with stable expectations for the policy rate. Inflation compensation moved lower over the period, particularly for shorter tenors, with staff models attributing these recent movements to temporary factors. Broad equity indexes continued to rise over the period, with the largest technology companies performing strongly on market participants' optimism about artificial intelligence (AI). The manager noted that rising stock prices were consistent with expectations for continued robust growth in earnings. Corporate bond spreads increased a bit this period but remained low in absolute terms. A couple of well-publicized bankruptcies, as well as some credit losses reported by some banks, led to increased investor scrutiny of credit markets, with investors reportedly closely tracking the riskiest segments of credit markets for signs of weakening and noting the possibility of future losses. Regarding international developments, the manager noted that the trade-weighted dollar index rose somewhat over the period. Despite its recent appreciation, the dollar remained weaker against all major currencies since the beginning of the year, and outside forecasters continued to expect that the dollar would depreciate modestly over the medium term. The manager highlighted that recent changes in *FED: 'SEVERAL' SAID DECEMBER CUT 'COULD WELL BE' APPROPRIATE *FED: `MANY' SAW DECEMBER RATE CUT AS LIKELY NOT APPROPRIATE Fed Minutes: Several participants highlighted the possibility of a disorderly fall in stock prices, especially in the event of an abrupt reassessment of AI-related prospects. FOMC Minutes: During Shutdown, Available Econ Indicators Showed Gradual Labor-Market Cooling FED MINUTES: MOST OFFICIALS WARNED THAT ADDITIONAL RATE CUTS COULD RISK EMBEDDING HIGHER INFLATION OR SIGNAL WEAK COMMITMENT TO THE 2% TARGET; MANY SUPPORTED OCTOBER’S CUT, THOUGH SOME SAID THEY COULD HAVE BACKED HOLDING RATES STEADY