Fed Lifts Rates in September, but Inflation and War Point to More Hikes

* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.

1. [Investment Window] Will 1997's 'One and Done' Repeat?

- Key summary: When the Fed raised its policy rate by 25 bp in September, market attention turned to whether the single hike under Alan Greenspan in 1997 would be repeated. In March 1997, the U.S. economy was growing at an annual real gross domestic product rate in the mid-4% range and unemployment had fallen to the high-4% range, yet inflation remained stable; the Fed then held its rate at 5.50% as the Asian financial crisis compounded the picture. By contrast, the Fed's September Summary of Economic Projections put fourth-quarter personal consumption expenditures inflation and core PCE at 3.7% and 3.4%, respectively, with real GDP growth at 2.3% and unemployment at 4.1%. Fiscal conditions also differ: the Clinton administration was rapidly shrinking the deficit in 1997, while the current Trump administration carries a cumulative fiscal deficit and the burden of high long-term rates. The writer expects the Fed to raise rates at least once more and then hold for a considerable period, given the inflation pressure from a prolonged Middle East war.

2. Corporate Bonds Shorten on High Rates: Sub-Three-Year Share Highest in Two Years

- Key summary: According to the Korea Securities Depository, bonds maturing in less than three years accounted for 41.8% of newly issued corporate bonds from the 1st to the 21st of this month, up sharply from 32.6% in June, 27.4% in July and 24.7% in August. The background cited includes growing concern that high oil prices and high inflation are becoming entrenched amid the continuing U.S.-Iran conflict, and the Fed's first base rate increase in three years and two months. SK REITs, which completed demand forecasting this month, structured its tranches as 40 billion won in one-year notes and 60 billion won in two-year notes, while outstanding issuance of commercial paper, which typically matures within one year, rose 7.3% to 219 trillion won this month from 204 trillion won at the end of last year. The term premium has widened as the U.S. 10-year Treasury yield broke through the 5% line on the 14th of this month for the first time in about three years, and the yield on domestic five-year unsecured corporate bonds rated AA- jumped to 4.89% on the 21st from 3.79% at the start of the year.

3. Resident Opposition to U.S. Data Centers Spills Over to Wall Street, Stalling IPOs

- Key summary: The New York Times reported that the data center backlash that has emerged as an issue in the U.S. midterm elections has spread to Wall Street. SB Energy, a subsidiary of Japan's SoftBank that has been pushing to build the world's largest data center in Ohio, pushed back an initial public offering planned for this month to after mid-October as investors questioned the more than $50 billion (about 68 trillion won) valuation the company had targeted. SB Energy has 8.8 gigawatts of capacity either contracted or under construction and projects $439 billion (about 596 trillion won) in lease revenue over about 20 years starting in 2028, but does not yet have a single data center in operation. Small modular reactor company Holtec halted its IPO plans indefinitely last week, and power company Aggreko also delayed its listing. Meanwhile, Nvidia disclosed on the 21st that it would acquire an additional $1.5 billion (about 2 trillion won) stake in SB Energy.

4. Battered by Surging Oil Prices, Trump Held Off on Striking the Houthis

- Key summary: U.S. President Donald Trump was preparing an airstrike on Yemen's Houthi rebels at Saudi Arabia's request but held off just before launch, according to reports. Saudi Crown Prince Mohammed bin Salman called twice in a single day on the 10th to urge the strike directly and asked again for intervention on the 17th. Trump had instructed the Defense Department to prepare the strike but reversed his position around noon on the 20th, a shift attributed to concerns that striking the Houthis could widen the Middle East front, destabilize Red Sea shipping lanes and drive oil prices sharply higher. Alex Plitsas, a researcher at the Atlantic Council, said a U.S. strike could provoke the Houthis and open a "Pandora's box" threatening the Bab el-Mandeb Strait, and that a misjudged intervention could send international oil prices soaring.

5. CATL Shares Waver on Fears of Automaker Customer Defections

- Key summary: Shares of CATL, the world's largest battery maker, closed at 297.10 yuan on the Shenzhen Stock Exchange on the 21st, down 1.61% from the previous session and narrowly avoiding a 52-week low. The stock has fallen 24.04% in September alone and 36.5% from its early-May high this year. Moves by automaker customers to diversify supply chains have weighed on the shares, including Li Auto's 2.65 billion yuan investment to become the second-largest shareholder in Sunwoda and Xiaomi's joint battery development with China Aviation Lithium Battery. CATL's first-half net profit of 43.284 billion yuan was double the combined 21.048 billion yuan of 15 major listed Chinese automakers, and that concentration of profit has prompted automakers to defend their own margins. Still, analysts lean toward the view that CATL's dominance will hold, as automakers have been unable to cut ties with the company entirely and energy storage system sales have risen to 25% of revenue.

6. Entering the $1.5 Trillion U.S. Nuclear Market: Early Investment Funds to Pre-Order Korean Materials

- Key summary: The government reported to a full session of the National Assembly's Trade, Industry, Energy, SMEs and Startups Committee that it is in talks with the U.S. on a "nuclear framework" under which two of eight large reactors in the U.S. would be built as Korean-designed APR-1400 units. Korean nuclear exports to the U.S. had been fundamentally blocked by a confidential agreement signed last year between KEPCO and Korea Hydro & Nuclear Power and Westinghouse, but the two countries agreed not to impose restrictions on reactor construction tied to investment in the U.S. With Trump saying he would build an additional 300 gigawatts of nuclear capacity, the U.S. is emerging as the world's largest nuclear market at $1.5 trillion (about 2,040 trillion won) based on $5,000 per kilowatt. Of the $120 billion total cost of the nuclear framework project, $20 billion has been allocated as a buffer against cost overruns. The two countries also agreed to use $10 billion of the early investment funds to order core nuclear equipment, opening the possibility that a significant portion of the remittance will return as orders for Korean companies.