TMGM Daily Market Breakfast: 19 September 2026

Morning Snapshot

• The Bank of Japan raised its policy rate by 25 basis points to 1.25%, its highest level in 31 years, but the yen weakened and USD/JPY traded above 157 as markets focused on the pace of further tightening.
• U.S. Treasury yields climbed, with the 10-year yield returning to 5%, as the Federal Reserve’s latest rate increase and a broader global tightening backdrop kept borrowing costs elevated.
• Kansas City Fed President Jeffrey Schmid said he supported the latest rate hike, citing inflation trending above 3% and broadening across goods and services.
• The U.S. dollar remained firm, with the Dollar Index touching its highest level since late July before easing back to just above 100.30 as Japan’s rate increase failed to lift the yen.
• European Central Bank rate expectations stayed skewed higher as rising energy costs and Middle East tensions fed concerns about stronger inflation pressures in the euro area.
• A sharper energy-price outlook prompted revised euro-area inflation projections, with headline inflation now seen peaking around 4.4% year on year in early 2027.
• The Bank of England left rates unchanged but overhauled quantitative tightening, including direct long-dated gilt sales to the Debt Management Office, and the 30-year gilt yield fell by 12 basis points.
• The Commodity Futures Trading Commission submitted a proposal on crypto-asset transaction and market regulation to the Office of Information and Regulatory Affairs, pending approval.
• Bitcoin rose above $80,000, erasing earlier weekly losses as the broader crypto market advanced alongside the U.S. regulatory proposal.

Market Developments

Rates & Foreign Exchange

U.S. Treasury yields moved higher, with the 10-year yield back at 5%. The Dollar Index touched its highest level since late July before slipping back to just above 100.30. USD/JPY rose above 157 and reached an intraday high of 158.06, while EUR/USD remained under pressure and headed for a weekly loss.

Cryptocurrencies

Bitcoin climbed above $80,000 on Friday, erasing losses from earlier in the week as major altcoins also posted gains.

UK Government Bonds

The 30-year gilt yield fell by 12 basis points after the Bank of England announced changes to its quantitative tightening programme, including structured long-dated gilt sales to the government via the Debt Management Office.

Macroeconomics & Central Banks

Bank of Japan Raises Rate to 1.25% but Yen Weakens

The Bank of Japan raised its policy rate by 25 basis points from 1% to 1.25%, taking borrowing costs to their highest level in 31 years. The decision was approved by a 7-2 vote, with Toichiro Asada and Ayano Sato opposing the increase.

Governor Kazuo Ueda said the central bank would continue to raise interest rates if economic and price developments warrant further tightening. The BoJ also flagged uncertainty tied to Middle East tensions, artificial-intelligence-related demand and foreign-exchange volatility.

Markets focused less on the rate increase itself, which had been widely anticipated, and more on the pace of future tightening. USD/JPY traded above 157 after the decision and reached 158.06 intraday, even as the BoJ reiterated its intention to keep adjusting the degree of monetary accommodation. August CPI excluding fresh food edged down to 1.7%, and broader inflation data were described as remaining below the BoJ’s 2% annual target, tempering expectations for a faster tightening cycle.

U.S. Yields Rise as Fed Tightening and Global Rate Moves Lift Borrowing Costs

U.S. Treasury yields rose on Friday, with the 10-year yield returning to 5%, as markets absorbed the Federal Reserve’s latest rate increase and a broader wave of global monetary tightening. The move came as the Bank of Japan joined other major central banks in acting against inflation risks.

The firmer U.S. rate backdrop also supported the dollar. The Dollar Index touched its highest level since late July before easing back to just above 100.30, while EUR/USD stayed on the defensive and headed for a weekly loss.

Fed’s Schmid Backs Latest Rate Increase as Inflation Stays Above 3%

Kansas City Fed President Jeffrey Schmid said he supported the latest Federal Reserve rate increase, arguing that recent data point to inflation trending above 3%. He said tighter policy was a step toward returning inflation to the Fed’s 2% target.

Schmid also said inflation had broadened across goods and services, underscoring concerns that price pressures remain persistent even after an extended tightening cycle.

ECB Outlook Shifts Higher as Energy Shock Lifts Inflation Risks

Higher energy costs and renewed Middle East tensions continued to push European Central Bank rate expectations upward. Forecasts cited in market commentary now point to at least one further 25 basis point increase in the deposit facility rate in December, to 2.75%, while some projections still allow for another move in March 2027.

The inflation backdrop has become more challenging. Revised energy assumptions were seen lifting euro-area headline inflation by about 0.5 percentage points across 2026 and 2027, with inflation now projected to peak around 4.4% year on year in January and February 2027. Full-year inflation forecasts were revised to 3.1% for 2026 and 3.5% for 2027, while core inflation was seen only 0.1 percentage point higher.

Even with the stronger inflation profile, the expected policy path remained gradual rather than urgent. Some forecasts argued the ECB would keep the deposit rate near 2.50% until at least 2028, while others saw any move above 2.50% as temporary if energy-driven inflation starts to ease from March.

Bank of England Leaves Rates Unchanged and Revises QT Operations

The Bank of England left interest rates unchanged but announced a significant overhaul of its quantitative tightening operations. Under the revised plan, gilt holdings maturing between 2035 and 2049, totalling GBP 146 billion, will be sold at a pace of GBP 20 billion per year directly to the government via the Debt Management Office rather than through market auctions.

The change reduced pressure on the long end of the gilt market, and the 30-year gilt yield fell by 12 basis points after the announcement. The policy decision itself was widely expected, but the QT adjustment was described as the main surprise in the package.

Regulation & Digital Assets

CFTC Submits Crypto-Market Regulation Proposal

The Commodity Futures Trading Commission submitted a proposal titled Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets to the Office of Information and Regulatory Affairs on Thursday. The filing has been received and is pending regulatory approval.

The move signals a renewed push to establish oversight for crypto-asset markets after comprehensive legislation stalled in Congress. The CFTC had previously extended a no-action position to providers of passive software as the CLARITY Act remained delayed.

Bitcoin Rises Above $80,000 as Crypto Market Advances

Bitcoin rose above $80,000 on Friday, erasing losses from earlier in the week as the broader crypto market moved higher. Major altcoins also posted gains during the session.

The advance came as the CFTC’s regulatory proposal added to signs that U.S. authorities are still moving toward a more formal oversight framework for crypto-asset markets.

Upcoming Key Events

• Bank of Canada Governor Tiff Macklem speech — Monday, time not specified: Macklem is scheduled to speak on economic developments in Halifax ahead of the Bank of Canada’s Oct. 28 interest-rate decision.