On this episode of The Rate Guy we recap today&#x27;s FOMC meeting and cover any happenings, surprise statements and of course Warsh&#x27;s tie color.

Fed Meeting Recap

The Rate Guy

# Full Transcript

**Podcast:** The Rate Guy

## Transcript

Welcome to The Rate Guy, an irreverent insight into interest rates and current markets. Here's your host, JP Conklin. Good afternoon and welcome to a special edition, FOMC, first ever Kevin Warsh-led meeting of The Rate Guy. I'm your host, JP Conklin, joined as always by my lovely wife and the real boss here at Pensford, Sarah. Good afternoon. Good afternoon.

It is much warmer in our quote-unquote studio with the sun beating directly through the windows into my eyeballs. You're basically blinded right now. I'm definitely overheated, not just because of the temps. What happened? It was kind of a doozy. Oh, man.

So today was Kevin Warsh's first meeting as Fed chair. I thought he would try to strike a balance between I'm independent, I'm willing to hike, that's what the data suggests, without upsetting Trump. I was wrong. He led off with, quote, we are unambiguously and unanimously committed to delivering price stability. The Fed has missed the inflation target for five years and we are going to fix that. Yowza.

He reiterated that point several times. I kept saying it was weird to me that Trump had chosen him because he's this apex inflation predator. He wanted to hike rates when inflation was one and a half percent, but unemployment was 10. Right.

He left no doubt he's comfortable hiking rates. And I think he sent a very strong message to the market that he is independent. The front end got whacked. Two-year treasuries are up 16 basis points. That is terrible news for caps. Half of the FOMC members penciled in at least one hike before year end and a couple of them multiple hikes.

The yield curve is the flattest it's been in a year. The 10-year treasury behaved a little bit better, is up about five basis points. But that's because it's generally a good sign that Warsh is willing to tackle inflation. That should alleviate some of the concerns that he won't hike if all the data suggests that he should. So what does the market think the odds of a hike are the rest of the year?

Odds of a hike next month are 40 percent, September 50 percent, and by year end 80 percent. Your boy Trump is at the G7, and when asked about it, he said, they held rates, so whatever. I know you've been quoting, but that's not a real quote. That's a real quote. And when Trump discussed the possibility of hiking rates, he said, it could happen.

Now, mind you, this is the same guy who, after every Fed meeting for the last year, has absolutely torched Powell for not cutting. Right? I think torched is an understatement, actually. He calls him stupid, a fool, too late Powell, on and on and on. This time it's just like, yeah, hiking rates could happen.

So the only thing I can take away from that is that Scott Bessent pulled Trump aside and was like, listen, you should expect some chatter about hiking rates. And it's OK. I don't know how long Trump will follow that guidance. My bet is one more meeting like we just had...

Fed Meeting Recap

Transcript

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Fed Meeting Recap

Transcript

Built for investment professionals

Every day you wait, your competitors are findingedge in conversations you're not hearing.

Every day you wait, your competitors are finding
edge in conversations you're not hearing.