Market outlook Global Liquidity Snapshot

Invesco Global Liquidity
October 9, 2026
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Key takeaways

  • Highlights:

    The Federal Reserve resumed policy tightening in September, raising rates by 25 basis points after holding steady in July. The European Central Bank also increased rates by 25 basis points as growth proved resilient and energy-driven inflation remained elevated while the Bank of England maintained rates but adopted a more hawkish stance.

  • Key areas to watch:

    Inflation remains the primary driver of central bank policy globally. In the US, investors are monitoring inflation trends, labor market conditions, Treasury funding needs and geopolitical developments. In the UK and Europe, market focus remains on whether higher energy costs feed into broader wage and price pressures and how policymakers balance inflation risks against slowing growth.

  • Investment implications:

    Higher front-end yields and ongoing policy uncertainty continue to favor liquidity-focused strategies. We believe maintaining reinvestment flexibility, emphasizing high-quality liquid assets, and selectively utilizing floating-rate and short-duration opportunities can help investors navigate evolving rate expectations and market volatility.

US

After holding rates steady in July, the Federal Open Market Committee (FOMC) unanimously raised the federal funds rate target range by 25 basis points in September to 3.75%–4.00%. The July meeting had already featured three dissents favoring an immediate rate hike, and the August Jackson Hole speech underscored the Fed’s commitment to returning inflation to its 2% target. The September decision confirmed the shift from a pause to renewed tightening, with policymakers unanimously voting to increase short-term interest rates by 25 basis points. The Committee pointed to resilient economic growth, strong labor market conditions, and inflation that remained elevated.

Treasury yields moved sharply higher across the curve during the period, reflecting greater uncertainty around inflation, monetary policy and term-premium risks, with the 10-year Treasury yield rising above 5%.1 Despite higher interest rates and market volatility, demand for liquidity strategies remained robust, with US money market assets holding near record highs as investors continued to favor liquidity, and capital preservation.

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  • 1

    Source: Bloomberg LLC, as of 09/23/2026

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