U.S. Fed’s anticipated rate hike will heighten scrutiny of chair Warsh’s post-meeting debrief — SkimNews
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- The Federal Reserve is expected Wednesday to raise rates 25 bps to the 3.75-4.00% range — its first hike since 2023 — with markets pricing the move at over 90% odds, driven by PCE inflation at a 3.7% annual pace in June and July and global bond yields climbing to multi-decade highs.
- Kevin Warsh, appointed by Trump who publicly wanted lower rates, faces a credibility test at his post-meeting press conference; the source notes three Fed policymakers already dissented for a hike at the July 28-29 meeting, and Warsh did not submit his own dot plot projection in June (where 9 of 19 officials were evenly split on the rate path).
- Donald Trump threatened new import tariffs if the Fed didn't lower borrowing costs, but the source notes his administration may tacitly welcome a hike — a move that could intensify questions about Warsh's inflation credibility, drive long-end yields even higher, and undercut Trump's pledge to make life more affordable ahead of November midterms.
- U.S. Treasury yields crossed 5% on Tuesday — a 19-year high — and economists say this secular shift toward higher borrowing costs may require the Fed to raise short-term rates just to maintain the same monetary policy footing, regardless of inflation.
- PGIM chief U.S. economist Robert Sockin expects three additional hikes and said a unanimous decision with projections signaling more increases in 2026 and 2027 would be "a strong signal," matching the tone of Warsh's Jackson Hole warning that "we have more work to do" if inflation doesn't fall.
- Standard Chartered analysts John Davies and Steve Englander pushed back, arguing the Fed should hold this week and warning of a "hall of mirrors" echo chamber driving market expectations despite "a very low cost to waiting."
Why it matters: Warsh was appointed by Trump specifically to cut rates, so a hike he frames too dovishly could trigger a long-end bond selloff — pushing mortgage and consumer credit costs higher and directly undercutting Trump's affordability pledge ahead of November midterms, with 10-year Treasury yields already at a 19-year high above 5%.
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