This was a hawkish meeting, with a unanimous vote for a hike and more hikes indicated.
By Wolf Richter for WOLF STREET.
With Fed Chair Warsh presiding over his third “good family fight,” as he likes to call these meetings, the 12 voting FOMC members voted unanimously for a 25-basis-point rate hike, bringing the Fed’s policy rates to 3.75-4.0%.
The bond market had been loudly clamoring for a rate hike, had priced in a rate hike, and was ready for a rate hike, and would have been shocked if no rate hike had come, and yields might have spiked further. But the rate hike soothed some ragged nerves, and bond yields declined.
In recent decades, the Fed has hiked in a series of rate hikes before switching to rate cuts. The last time it hiked only once – a single-rate-hike cycle – before cutting again was in March 1997.
So if history has any suggestions to make here, it would indicate that this is the beginning of a new rate-hike cycle, and not a one-and-done, and the “dot plot” points that way too.
The statement, under new the rule of eschewing “forward guidance,” was sparse. It was primarily worried about inflation, and less worried about the economy and labor market. That shift had started in March under Powell.
Other than the results of the vote, here are the remaining changes from the July statement:
New: “Economic activity is expanding at a solid pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
Old: “Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
New: “Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal. The Committee will deliver price stability.”
Old: “Inflation remains elevated relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The Committee will deliver price stability.”
The Dot Plot hangs on without Warsh.
The dot plot is part of the “Summary of Economic Projections” (SEP), which the Fed releases four times per year. The SEP is an official act of forward guidance, released despite Warsh’s efforts to squash forward guidance. Warsh had put the Dot Plot on death-watch at his first meeting by not submitting his own projections, and that continued. “I’m not in the forward guidance business,” he said at the press conference today. So 18 participants instead of 19. And it turned very hawkish.
Of the 18 dots, 12 participants saw 1 additional rate hike by year-end, which became the “median projection”; and 4 participants saw 2 more hikes; so 16 saw at least one more rate hikes by the end of 2026:
- 4 see 2 more hikes
- 12 see 1 more hike
- 2 see no change
- 0 see rate cuts.
Inflation projections in the SEP:
- Headline PCE inflation by the end of 2026 rose to 3.7% from 3.6% in June, comes down to 2.3% by the end of 2027.
- “Core PCE” inflation by the end of 2026 rose to 3.4% from 3.3% in June, and comes down to 2.5% by the end of 2027.
- Not hitting the 2.0% inflation target till 2029.
- Federal funds rate rose to 4.1% for the end of 2026, and also to 4.1% at the end of 2027.
- “Longer-run” (beyond 2029) projections for the federal funds rate rose to 3.2%.
- GDP growth projections for 2026 accelerated to 2.3% from 2.2% in June. For 2027, it accelerated to 2.4%.
- Unemployment rate projections declined to 4.1% for the end of 2026, a historically low unemployment rate, and remained there past 2029.
Warsh at the press conference:
Why now and not in July:
“What transpired in the seven weeks since we last met? … I will highlight three things that happened in that intermeeting period.
“One is I made a judgment seven weeks ago about the strength of the economy. There has been a pretty wide-ranging set of data, including the labor markets that the economy has strengthened….
“Second, inflation trends. My judgment some weeks ago was the inflation summer trends weren’t passing the test. I have seen very little information since that would make me reverse that decision, so I have stuck with it.
“The third thing that has changed in seven weeks are geopolitics. There is no hiding from hot spots around the world, and our judgment about what is the most likely, or least likely of the geopolitical situation has changed.
“All three of those things helped themselves to a firm, unanimous decision today.”
“Inflation is the problem”
“My suspicion when I showed up was that the US economy was strengthening. Even over the last several weeks we have data broadly defined that says the economy has, indeed, strengthened. Underlying growth is higher.
“Inflation is the problem. Stable prices have been the problem for now more than 5.5 years. So what the Committee decided to do today was take action to ensure a timelier return to our price stability objective.
“Price stability is foundational to economic growth, and I think we took an important step today to deliver it. We did it in part by removing a dose of accommodation.”
Why have bond yields surged recently?
“First is economic strength. Part of the reason we have seen over the course of 2026 long-term yields go up is the economy has strengthened.
“The second reason, the competition for capital. The surge in expenditures which I referenced in my remarks is real, and the so-called hyperscalers are out in the market raising funding, so the competition for capital is real, and it partly explains the increase in yields.
“The third is geopolitics. The hot spots around the world are driving long-term yields. It is not simply spot prices of energy… but it is the difference between those spot prices and so-called crack spreads.
“So, I think those are the three leading explanations, but certainly not an exclusive list.”
But that sigh of relief in the bond market was brief.
While Wash was talking at the press conference, bond yields did a 180 and began to rise again, undoing the entire drop. The 10-year Treasury yield is now back at 5.0%.
Stocks also started sliding when he was talking, quickly proceeded deeply into the red, and then bounced some, but remained red at the close.
Warsh sounded really hawkish, despite eschewing forward guidance. And the hawkish dot plot without Warsh didn’t help.
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“Other than the results of the vote, only the paragraph remaining paragraphs changed from the July statement:”
Maybe a little keyboard jitter to fix here before the mob shows up?
Well, I was wrong. Trump has to be furious. They were checking all the boxes in their plan and Warsh raised. Why do all that fighting with Powell to hire someone to do the same thing?
Some ideas: 1, Powell had the taint of being re-appointed by Biden. 2, Trump didn’t expect Warsh to disobey orders. 3. Warsh tried to obey orders, but the other board members wouldn’t go along with the directive.
The Federal Reserve Board and its 12 member FOMC (Federal Open Market Committee) certainly do not take ‘orders’ from the White House and never have and never will.
Agreed! They’ve shown a good degree of independence.
Yes – rather, Trump put someone in that he thought would follow orders and found out otherwise.
But Warsh is behaving as he always has. Surely Trump must have known he would be hawkish? Did he want a fall guy?
Although this is an odd choice because Warsh is the son in law of one of his biggest donors.
I was wrong too. The hard numbers are roughly where they’ve been for the past year as this largely-the-same FOMC held (or cut) rates. What flipped the FOMC to a unanimous reversal? I certainly don’t know.
Did KevWar make the difference? Seems simplistic.
I suppose the FOMC members moved as a unanimous herd in order to not be left behind. I.e. when a critical mass decided to move in the direction of a rate hike, the rest followed quickly.
I think it was the bond market. Also I wonder if there was concern about the Japan carry trade if the US holds and Japan goes into a hiking cycle.
Good point MM.
The scene of Bessent trying to play “hocus pocus” games to control the effects of inflation on the treasury market might have been the last straw.
Time for many Fed-watchers to admit that either
(a) There is no “plan”, it’s all improvised,
or
(b) There might be a plan, but it’s either not being communicated to you, or it’s being overwhelmed by the narratives being fed by interested parties into your media feeds.
P.S. What I like is how the market priced in the hike and that forced the doves on the FOMC to either fall in line or have to justify why in the heck they think the market is wrong and rates don’t need to be raised.
It isn’t media narratives. It’s common sense. The last vote was 9-3 hold. This vote was unanimous, not 3-9 or 5-7 which shows any dissention. Trump hired a guy to advocate for him, and not only did Warsh sway zero voters to his side, he actively voted against Trump’s wishes. That is completely illogical. Are you saying Trump secretly want higher rates? It doesn’t make any sense.
Every hero needs a villain. Fed can be the bad guy and bring inflation down while trump yells about interest rates to appease the masses
MM, they just know inflation is about to go gangbusters. You can’t lasso the moon.
Someone wiser than me once said “Plans are useless, but planning is everything.”
… Trump’s ME debacle is driving part of the inflation story.
Perhaps he will be more motivated to resolves this post hike and when the US gov decides they have to ban diesel exports … and EU gets hammered on energy.
‘Trump’s “me” debacle’ would actually be the most succinct summation I have seen for this whole presidency. Bravo.
The inflation is way out of FED’s target of 2% for quite last few years.
The market already priced in this 25bps hike.
If KW really was serious, he would have hiked by 50bps.
Warsh was hired to lower rates not raise them, be thankful for what we got! Besides its not his call alone, there’s 11 other votes.
Yes, I am really grateful to FED chair for the last 15 years for financial repression which increased the wealth inequality in this country to disgusting level and make life f common joe so tough, they can’t even afford a decent home to live.
LOL you people keep joking. “HE” needs a majority of at least 7 out of 12 voting members to vote even for him to go to the bathroom. He cannot do anything on the FOMC by himself. But he can try to persuade them to let him go to the bathroom, but that takes time.
But he delivered a unanimous rate hike, a 12-0 vote.
Wolf – do you think if Warsh is naughty in ‘class’ they make him sit in the corner and read Mary Poppins? Oh, and wear a dunce hat?
Love it want more of it. Got a long battle ahead it’s not going to go away easy.
It’s like Shingles, but Shingles of the Economy.
Inflation hurts!
😆
Also, what is the data behind this idea? Taylor rule says 1 quarter point raise now, and then see what happens in a month and a half. Inflation is 3.4%, not 8%.
Taylor rule is dead. FED does not follow Taylor rule else they would have raised much earlier and faster with bigger hikes.
Completely false. You can look this stuff up online, you know. The Fed has almost exactly followed a highly smoothed Taylor rule with one exception: they refused to follow it in 2021 when it said to raise rates and waited an extra year. But then after that they followed it very closely again.
Go here and change the “Interest Rate Smoothing” to 0.85. You can see how closely they match. The only real difference is that they tend to be one quarter early on each cutting cycle.
Oops. The link is this: https://www.atlantafed.org/research-and-data/data/taylor-rule
Almost certainly there will be future hikes with the way inflation is going; and so they are going slowly just like the last time they had to do hikes.
No dissents is the most important takeaway imho
Agreed.
Here down under, we have mirrored most of the mistakes of the US. Probably not because we followed you, just because our Reserve Bank made looked at the same data showing a tiny bit of slowing and jumped on the cut band wagon.
We are about to reverse again and start raising too.
My emergency fund is several thousand Aussie dollars. They are up against my US dollars by over 6% this year, and they’re not even invested in anything.
I’m searching for a way, as a foreigner, to invest in Aussie bonds.
If you like short term floating rate corporate notes, VanEck FLTR is easy to buy and has Bank of Australia as it’s top holding, though US is top country overall by weight.
MVIS® US Investment Grade Floating Rate Index
43% US
13% UK
11% JP
11% AU
Disclaimer: I am retail investor who owns FLTR, no other conflicts.
This ETF may fall into the trap of having too little spread vs Treasuries to justify the risks, as noted by Wolf in some of his general comments on corporate bonds (I of course cannot speak for him and he has not mentioned this specific fund to my knowledge.)
Chris, do you mean just a global brokerage account? IBKR for example.
Then just buy an Aussie ETF like IAF/VAF.
Looks like 12 people are going to come under Trump’s crosshair very soon. The diatribe on Truth soon is going to be mighty entertaining…
The Truth just dropped (I have the 100k sub) and it looks pretty timid tbh
Jk I don’t have the 100k sub 😆 I hope the subscribers got their moneys worth
September 16, 2026 4:38pm
Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR. Our Country is BOOMING with new Investment! If we stopped Trading with every country that we have a Deficit with, which is most of them, we would make, at least, 1.5 Trillion Dollars a year. The word “Deficit” is nothing more than a fancy word for LOSS. We are “carrying” almost every country in the World, and that cannot go on any longer. LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST! President DONALD J. TRUMP
🤣 The fake DJT has finally shown up here
It certainly implies we are at the beginning of a rate hiking campaign.
So this was why we had the “Let’s slow down AI meeting”
The spread is being squeezed!
Today was the first time I remember a Fed chairman talking about working class Americans living pay check to pay check and saying we need to get inflation down for them. It’s always been about the capital class that the Fed has served. Especially the New York governor is committed to the capital class.
If it’s real Bravo! Would of went for 50 basis, but always got next time
Eh, I heard JPow reference the lower SES folks, but nobody paid much attention.
KevWar was responding to a question specifically about how lower inflation would help the paycheck-to-paycheck crowd. It won’t, but he answered the question diplomatically.
KevWar is such a mystery we pay special attention to such comments.
Lower inflation would disproportionately help the paycheck to paycheck crowd, just as high inflation whacks them. After 5 years of high inflation, they deserve a break. This isn’t really arguable – is it?
Warsh “ What I was referring to in the least well off tend to be people that don’t own financial assets. Call that a bit less than 50 percent of the country. They don’t have equity in their home. They don’t have equity in a 401(k) plan. So they’re living off their paycheck that comes every couple of weeks.”
He explains who would benefit and tells us how they would benefit; Warsh “ And stable prices, an environment where inflation is running consistent with our 2 percent objective, offers good news, because that way when they get their wages they can put their head above water and deliver real take-home pay increases. We don’t have total responsibility for it, but we do have responsibility for stable prices. As I’ve said before, inflation is a choice. And today we took a step in delivering it.” He put an effort to make the above happen today!
OK. I am going to be a bit of a Devils Advocate….. I understand the timing of what I am saying is a problem for those living paycheck to paycheck, but it doesn’t negate the overall point.
In a high inflation environment, the logical answer is to spend money as fast as you get it. Inflation will kill anything you save. Who spends as fast as they get it? People living paycheck to paycheck.
In the long run, eventually wages generally keep up with inflation, so people who spend it all right away are not hurt by inflation (again, I fully recognize that timing can be painful. Raises are often months after inflation). So I do not think those living paycheck to paycheck are all that hurt by inflation.
The extremely wealthy have lots of options. Their wealth allows them to generally overcome any economic catastrophe. Their wealth gives them flexibility to adapt.
The people most hurt by high inflation is the middle class. Those who make enough to live on and try and save for a rainy day, but hugh inflation crushes those savings.
I agree. What has just happened is the US Gov can no longer reliably affect/control the price of Oil. And it’s poised to lose much, much, much more than that. Epic is what this all is.
Their statements reflect such, with typical non-statement language. In the end, the country knowingly is getting what it asked for and that’s not something a lowly econ board can control.
Yea… but – keep in mind – we sell the Oil. Our cost of oil production has not increased.
WTI price up benefits Texas and New Mexico (New America?) primarily – that’s who wins from high asset prices. Remember selling assets high has an economic winner… yea it’s those states.
People seem to forget we are the world’s leading oil producer and the IRGC is not increasing our production costs. Ticker USO is the value of American Capital.
I’ll say the quiet part loud:
“We Sell the Oil!” 📢
Not only sell but “net exporter” = US economy thrives with higher oil prices.
people still have the 1970s mentality about high oil prices.
Historically when the price of oil got too high or too low the industry crashes and people file bankruptcy. Right or wrong?
Inflation inversion in October? when the inflation rate gets above the unemployment rate.
Wolf,
How about if we keep the oil in country and let domestic prices fall?
They’re thinking about. They’re tossing around an export ban on diesel.
Rising Fuel Prices Set Off Anger and Protests Around Globe…
That is why the tariff war with Canada is absolutely stupid. Almost all of the U.S. trade deficit with Canada is because of the oil the U.S. imports from Canada, then refines and sells to the rest of the world.
Our trade deficit with Canada makes the U.S. money.
That is why it is utterly stupid to look at trade deficits as other countries taking advantage of the U.S. Dumb.
To borrow an expression from Mrs. Doubtfire -he doesn’t give a rat’s a** “about working class Americans living pay check to pay check and saying we need to get inflation down for them.”
Talk is cheap.
Sounds good to me.
Inflation sucks for everyone.
Professionals doing their job will hopefully provide some stability. Please, no tweets about it from the WH, and keep minions quiet. Let the grownups work. The 12/0 for a hike was pretty stark.
25 points is like pissing on a forest fire.
Mr. Wolf quotes the FOMC: “Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal. The Committee will deliver price stability.”
Analysis:
1. Inflation comment is stating the obvious to appear proactive and transparent.
2. Timelier return comment is a false future; i.e., nebulous as to the how or when.
3. Committee will deliver comment is a false future, but the real goal is to inspire trust to end public unrest and pressure.
Aside: Learning to detect and interpret “toxic” communication techniques is important in all aspects of life; especially if a person does not know the exact scam or entire fact pattern.
Howdy Folks Even the sober sailors / squirrels are a gettin ready for more purchases….Gosh, I got goose bumps too….
Wolf, quick shout out for just being an amazing person. You continue to be such a solid source of good info and insights. Seriously can’t thank you enough and appreciate all you do!
All you readers out there be sure to show your support and donate!
Refreshingly good presser. I like the format change of 1 question / person and the brevity with which he answers always careful of not injecting his personal opinion or providing anything that could be construed as guidance.
NickT from the WSJ was at the back of the room — guess his VIP pass is revoked.
Notice how a few of the press folks started with a few words of thanks along the lines of “thank you for taking our questions today.” I may be reading into this too much, but between Warsh’s historical comments about not providing forward guidance, being dutiful about keeping a tight lip, and reducing the number responses to questions per person to 1, I suspect that this format will be gone by this time next year.
My forecast: Closed door meetings only. No more press conferences post FOMC meetings. The public can read the FOMC statement beginning at 2:00 PM Eastern time. And the public can read the FOMC meeting minutes a few weeks later. That’s it. And that would be refreshing. Eliminate the circus show around this serious business.
I love the way Warsh rubs that in, one question per person. They all ask multiple questions, and he said, I like that, I get to choose which question I want to answer. The guy is a hoot. He has a tight leash on them, unlike Powell.
As treasury yields rose from the grave, this was inevitable. This wasn’t up to the Fed, or any politician.
One observation – the realtors and related have given up and gone silent on interest rates for some time now. Maybe the same future awaits the Wall Street – Media complex.
Too little; too late.
It should have been a 0.5 hike to restore credibility after Bessett’s antics.
Oil will decide long yields.
Warsh did the only thing he could do. But not a single journalist in this room asked the only question worth asking: Mr Warsh, you mention the strength of the economy and its solid growth. You are talking about nominal growth. Isn’t this growth mainly driven by inflation, and real growth is closer to 1%?
In Q2 nominal (not adjusted for inflation) GDP growth was 8.0% annualized. Overall inflation (for consumers, businesses, and governments) in GDP was 6.44% annualized. So “real” GDP growth (adjusted for this massive inflation) was 1.5%. This is what it means to “let the economy run hot.”
No one asked because everyone knew that, because they all read my site, and I’ve been discussing this all year. Everyone except you knew this.
Below are:
1. Nominal GDP, note the 8.0% growth in Q2
2. the chart of inflation in the overall economy. I have featured it in several articles in recent weeks:
Here is one of the articles where I featured it:
https://wolfstreet.com/2026/07/30/inflation-in-the-overall-economy-hitting-consumers-businesses-and-governments-was-really-bad-in-q2-even-without-energy/
Very well said, Wolf! Your bonus paycheck is in the mail, signed by the Chairman himself! Bravo
Real GDP growth has been remarkably consistent at 2.5% per year since 1990. This past year has been 2.1%.
“Real GDP growth has been remarkably consistent at 2.5% per year since 1990.”
You’re talking about the long-run averages that average all of this out. Real GDP growth has been extremely volatile, with massive increases followed by big decreases and small increases.
Here are the last 17 years:
True, there are substantial variations at the quarterly level, though many of those smooth out a lot at the annual level (not counting the large variations that come from recessions/recoveries).
You could also argue that real GDP growth in the AI boom (~2.5%) is substantially lower than in the Internet boom (~4.5%)
To Numbers (Hope I’m doing the reply thing correctly):
But what size was the economy during the “Internet Boom”, and please compare it to the size of the “AI Boom” Economy. (We had a $10.2 Trillion Dollar economy in 2000, but a $30.7 Trillion Dollar economy in 2026). They’re not even close to the same, right, even when adjusted?
Do you not think that smaller growth percentages on a much, much larger economy can also in fact approximate or even surpass a larger growth percentage of what was in fact a much smaller economy in the 2000s? (Example: using your percentages, 4.5% of $10.2T = $459B vs. 2.5% of $30.7T = $767.5B worth of growth.)
So although 2.5% is lower than 4.5%, it would correspond to approximately $306 billion more annual output, or about 66% more, based on those nominal GDP levels. Even inflation adjustments probably shouldn’t erase such huge gains.
One would naturally assume that larger economies should expect to see decreasing levels of growth represented in slower GDP numbers, but that doesn’t necessarily translate into diminishing levels of return for the economy, right? Or am I missing something here (probably am, I’m still learning, sorry) Thank you, and Thanks as always, Wolf.
Well, I never committed to eating my shoe if I was wrong but will have Panda Express instead, which seems like a solid compromise.
🤣❤️
I never say never
But the Asian food you microwave in the freezer section looks better than the pics I see of my local Panda Express.
Hey, if you’re feeling sad about things, Tai-Pei fried rice delivers a little extra at your local Wally World.
They are indicating the inflation target of 2% won’t be reached until 2029. That says a lot about their sense if urgency.
Let’s stick it to the little guy for three more years, minimum.
TIPS market sniffed that out too. Real yields moved up by a relatively big increment:
5-yr 7-yr 10-yr 20-yr 30-ry
09/15/2026 2.42 2.51 2.62 2.90 3.07
09/16/2026 2.51 2.59 2.68 2.93 3.09
Jiffy corn bread per 8.5 oz box has gone from $.50 to $.87 in less than a year at local Walmart store
Egg prices have plunged by about 60% over the past 12 months, we’re now buying a dozen grade A large at $1.49 in San Francisco where everything is out the wazoo expensive.
Jeff:
Inflation sucks, but you are talking about $.37.
I understand this is food products that everyone needs, and not downplaying it.
But people dwell on relatively small increments in gas and food or whatever.
When the much larger most glaring increments are in health care, mandatory health and vehicle, and home insurance, taxes of all sorts, rental and owning housing, are at stake.
I have found that even homeless, jobless people on the corner would shun $.37
Because the average person does not care about that amount. People won’t even bother to pick it up off the sidewalk.
I think people tend to dwell on what effects them least, and overlook the more glaring issues… for whatever reasons.
I observe it every day…. And it completely perplexes me.
By the way, I just paid $.79 per pound for chicken quarters, $1.25 for bone in pork chops, and $.99 a pound for fresh peaches.
Similar to prices I paid for the same products 20-30 years ago.
Jiffy is by far the worst and most crumbly corn bread imaginable, while the best is Dolly Parton brand available at Amazon.
Additionally I take argument to people who say that junk modified food is cheaper than real food.
I experimented and looked at many convenience stores, 7/11, WAWA, Dollar General, Dollar Tree etc. Many across the nation.
Bannannas and apples $1 each. Flaming Hot Cheetos $4.99. Slim Jim $3.99. I was unable to find a trash/ premade food in any establishment that could price compete with most real solid genuine food.
Beef excluded… haha
Large, white eggs in Phx, Walmart are $1.99 doz.
Lot of tea leaves to be read here.
The biggest for me was the two questions involving Trump and Warsh laughing them off and being dismissive. And the unanimous decision.
My optimist says Trump got played and Warsh is laughing at him.
My conspiracist says this is just theatre to mostly calm markets before the fix is in and Warsh is laughing with Trump.
Only option is to wait and see. MW has 10yr at 5.023% right now.
Really? I think breaks the other way. After mid-terms everyone is locked in for two years. I see another 1/4 point raise in December. I’ve got a ton of contractors that are debt spending in order secure contracts building data centers. The economy as a whole is not slowing down, so the rates are going to have to keep pace. Personally, because of the the years I have until retirement – I am closely balancing what goes in the 401k vs. what I keep liquid and semi-liquid in CDs. I can’t afford to miss gains on either side of the game.
I mean we could have a hold in October right before the midterms and depending on the language we could have a pretty big rally in the stock market. We have this meeting being a credibility establishment move with the next being the best realistic boost for Trump if it’s a hold. This is the conspiracy option. Of course you’d need the board to vote this way for it to happen. I doubt this is the case but it is a big club after all and we ain’t in it.
The optimist (albeit short term pain ironically) is a hawkish fed that have all gotten on board with actually fighting inflation for the first time in a long time of higher than target inflation. This would seem to be the case given the data points. From the focus on inflation rather than employment, to the dismissive attitude of the coming Trump tantrum, to the unanimous vote, to the lack of harping on inflation being just a supply shock transitory issue due to Iran/Russo-Ukraine wars.
Surprisingly nobody asked questions directed at the national debt and bond yields being the biggest real driving force for keeping rates low or a near term rate cut to refinance this transition to short term debt The House…. Oops. I mean Bessent is wanting to do. This arguably causes me the biggest pause with the whole thing. Perhaps Wolf can enlighten me on why this is wrong or a non issue.
Like Mr. T said though, I predict pain. Luckily I am at the most financially secure point in my life by a wide margin and very well insulated from all this for a working class nobody.
What is the fix?
Wolf, I have a question for you. I was looking at the differences in the core PCE and core CPI. You had already called out that the PCE was experiencing a spike in inflation.
I noticed that this was the first time in recorded history (since 1960) where the core PCE inflation was higher than core CPI inflation. They are usually virtually identical, or the PCE inflation will be a bit lower.
Do you know why PCE inflation is higher than CPI right now?
MW: Fed rate hike fails to calm troubled markets as Dow falls 600 points. Expect more sharp swings in stocks and bonds.
I’m liking the 13 and 17 week T Bills. Nice to see a solid 4 number back in front.
I don’t see the rate hiking cycle lasting very long when economic mayhem comes most likely with the diesel shortage.
What will realtors use as their slogans now?
I feel like “marry the house, date the rate” no longer work and neither does “buy now, rates are gonna drop and prices are going to take off again”
It seems difficult for them to raise rates again in the next meeting on 27-28 October because that is a few days before the mid-term elections. Either way, they will be accused of political bias.
There is no meeting in November, so another rate rise on December 8-9 looks like a sure thing. Will they go the whole 50 basis points?
The second wave of inflation is just getting started, the bond “market” is broadcasting this loud and clear and the Fed is behind the curve.
A .25% rate increase was the absolute bare minimum the FED could do and still retain credibility. If the rate was held steady, long term bonds go through the roof. A .50% (or more) hike would have shown they were more serious about inflation, but that would have definitely drawn the ire of the Nutter in Chief.
So all that was done was to kick the can a little bit further down the road and hope and pray.
Hope and pray is not a strategy.
LOL! The Fed’s credibility died long ago. The Fed has rewarded bad behavior for 50+ years. I did not consent to any of the BAD DEBT congress has racked up feeding the bad decisions of the MIC and banking/finance sector.
Long past time to put heads on pikes.
Hedge accordingly.