Company: NLY-PF
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0001043219-25-000012
Chunk: 156

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-10-30
Form: 10-Q
Item: Part I, Item 1
Chunk 156
---
 wage growth, as measured by the year-over-year change in Average Hourly Earnings, dropped moderately to 3.7% in August from 3.9% at the beginning of the year.

Inflation readings, as measured by the year-over-year changes in the Personal Consumption Expenditures (“PCE”) Price Index, remain above the Fed’s 2% inflation target, and disinflationary progress has stalled. Total PCE prices over the 12 months ended in August increased marginally to 2.7% compared to the 2.6% recorded by the same metric in June. Core PCE inflation, which excludes volatile food and energy prices, also ticked up to 2.9% in August from 2.8% in June. While tariff-related inflation pressures have been uneven and overall lower-than-expected, the inflation trend has leveled off, driven by rising goods prices and sticky services prices. Moreover, the forecast for inflation remains uncertain due to the most significant increase in the effective tariff rate in decades, whose full impact has yet to materialize. 

The Fed conducts monetary policy with a dual mandate: full employment and price stability. Despite the slow progress on inflation, the FOMC cut the target range for the Federal Funds rate by 25 bps to 4.00% - 4.25% at their September meeting given the weakness in the labor market. Updated forecasts from the FOMC showed a median of two additional 25 bps cuts for the remainder of 2025, and one 25 bp per year in 2026 and 2027. Fed Chair Jerome Powell highlighted that the risk of weak employment growth had risen, which justified a lower rate path under their risk management framework but also argued for maintaining a restrictive stance while the FOMC assesses the appropriate monetary policy response. The updated economic forecast now expects higher growth and gradual improvement in the unemployment rate across the projection horizon while inflation projections for 2026 rose. Meanwhile, regarding the FOMC’s balance sheet policy, the Fed did not make any additional announcements and maintained its monthly redemption cap of Treasury and Agency MBS holdings at $5 billion and $35 billion, respectively.

The continued resilience of the U.S. economy supported strong financial market performance in the third quarter, with both equities and bonds rebounding from tariff-related concerns in Q2 2025. Equity market strength was driven by the ongoing AI boom, solid corporate earnings, and the Fed’s rate cut. Meanwhile, the Fed’s