Fed Holds Rates Steady As Global Markets React

As the global financial landscape continues its dance of uncertainty and optimism, the week ending September 26, 2025, offered a revealing snapshot of the forces shaping markets from Wall Street to Seoul. At the heart of the story: the US Federal Reserve’s decision to maintain its benchmark interest rate around 4.25%, a move rippling through equities, currencies, and investor sentiment worldwide.

The Federal Reserve, led by Chair Jerome Powell, recently nudged the federal funds rate up by 25 basis points, landing it in the 4% to 4.25% range. This decision, as reported by Investing.com, came amid persistent calls from former President Donald Trump for more aggressive cuts. Trump, ever vocal on economic matters, argued on Truth Social, “If it weren’t for Jerome ‘too late’ Powell, we would have already reached 2% and be on the path to a balanced budget. Luckily, we’re overcoming his incompetence.” Despite the pressure, Powell and his colleagues have emphasized a steady, measured approach, wary of the risks that abrupt moves could pose to inflation and labor markets.

Market expectations, according to CME FedWatch data cited by Investing.com, suggest a 93% probability that the Fed will hold rates steady in October and a 59.8% chance of another hold in December. The central bank has signaled its intention to keep rates near 2% for the next two years in an effort to control inflation and stabilize economic growth. The revised second-quarter US GDP growth rate, now at 2%, underscores the Fed’s cautious optimism—growth is present, but so are the shadows of risk.

Across the Pacific, South Korea’s Kospi index reflected the global mood swings. According to 연합인포맥스, the Kospi closed at 3,415.05 points on September 26, up 56.06 points (1.62%) from the previous day. This comes after a period of record highs, with the index brushing against the 3,500 mark. Yet, the rally has shown signs of fatigue, as a trifecta of challenges—exchange rate volatility, unresolved US-Korea tariff negotiations, and the Fed’s monetary stance—has tempered investor enthusiasm.

The dollar-won exchange rate has been a particular point of concern. After surging past 1,400 won, the strong dollar—bolstered by rising US Treasury yields and Powell’s recent comments—has dampened foreign investor appetite for Korean equities. “The dollar isn’t especially strong,” explained Heo Jae-hwan, an analyst at Eugene Investment & Securities, “but the won has been relatively weak.” He noted that while the won gained 8.5% in the first half of the year, it has since given back about 3.6%, erasing nearly 40% of its earlier gains.

Trade negotiations between the US and South Korea have further complicated the picture. Disagreements over a $350 billion investment package have left both sides at an impasse. Trump’s insistence on upfront investments and Commerce Secretary Howard Lutnick’s hints at increasing the agreed amount have clashed with South Korea’s preference for loan-based commitments. President Lee Jae-myung has even made a currency swap deal a prerequisite for any final agreement. As Han Ji-young of Kiwoom Securities put it, “The rise of the dollar-won rate to the 1,410 range reflects some of the concerns over the difficulties in tariff negotiations.”

Meanwhile, the Fed’s steady hand has provided a measure of reassurance. The third-quarter US GDP growth rate was revised upward to between 3.3% and 3.8%, and inflationary pressures appear to be easing. This has buoyed both US and South Korean stock markets, with experts pointing to the Fed’s predictable policy as a key pillar of market confidence. Still, not everyone is convinced the good times will last. Austan Goolsbee, President of the Federal Reserve Bank of Chicago, voiced caution about preemptive rate cuts. “If we see indicators that we’re on a stable path to full employment and inflation is returning to 2%, then rates could come down significantly,” he said. “But until that’s certain, I’m wary of too many preemptive moves.”

In the US, the week was packed with economic data and high-profile speeches. As 연합인포맥스 detailed, the period from September 22 to 25 saw a flurry of activity: speeches by top Fed officials, the release of revised GDP numbers, and a close watch on inflation indicators. The consensus among analysts is that the Fed will maintain its current stance through the end of 2025, balancing inflation control with the need for steady growth.

Tech and AI stocks, always a barometer of market risk appetite, saw notable swings. On September 25, major US tech companies like Nvidia, Microsoft, Apple, Amazon, and Google all closed lower, according to 연합인포맥스. The declines followed Powell’s remarks that “asset prices, including stocks and other risk assets, are fairly highly valued.” This comment, coupled with skepticism about the sustainability of the AI sector’s rapid gains, led to a broad-based pullback. Nvidia’s recent $100 billion investment announcement in OpenAI, while headline-grabbing, has not dispelled concerns about a potential tech bubble. Jay Hatfield, CEO of Infrastructure Capital Advisors, offered a sobering take: “I wouldn’t say no one will use AI and the world will end, but current valuations are certainly stretched. There’s little reason for optimism.”

Not all was gloom, however. Japan’s Nikkei 225 set new records for three consecutive days, buoyed by a weak yen and strong performances from export-oriented firms like Nissan and Mazda. SoftBank Group, riding the wave of positive sentiment around its AI investments, climbed to become Japan’s second-largest company by market capitalization. In contrast, the global cryptocurrency market suffered a sharp downturn, with total market capitalization dropping by $162 billion in a single day and Bitcoin sliding to $111,630. The altcoin sector was hit even harder, as Pi Coin plummeted 47% to an all-time low.

Legendary hedge fund manager Mark Spitznagel sounded an alarm in The Wall Street Journal, warning that after the current rally, markets could face a historic collapse reminiscent of the 1929 crash. “The current situation is like the early days of 1929,” he said. “The government is propping up the markets, but eventually, a major collapse could follow.” Spitznagel, founder of Universa Investments, is known for profiting during market crashes, and his analogy—“It’s like putting out a forest fire, but the dry tinder is piling up”—resonated with those wary of today’s lofty valuations.

Back in Korea, the Kospi’s prospects remain intertwined with global trends. Seasonal factors, such as institutional portfolio rebalancing at the end of the third quarter and the upcoming Chuseok holiday, add another layer of volatility. Historically, the Kospi has underperformed in the days surrounding the holiday, with average returns of -0.4% to -0.5% in the five sessions before Chuseok. As one analyst put it, “The rest of this month is likely to see stagnant index movement and sector rotation. The long holiday and institutional rebalancing could heighten volatility.”

For now, the message from central bankers is clear: patience and prudence. Whether that will be enough to stave off the next storm remains to be seen, but for the moment, markets are taking comfort in stability—however fleeting it may prove to be.