Fed Holds Rates as Warsh Loses Bond Market Trust
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- The FOMC held the benchmark federal funds rate unchanged at its Aug. 28-29 meeting, with three of 12 voting members dissenting in favor of a quarter-point increase.
- The personal consumption expenditures price index declined just 0.1% from the prior month and stood 3.7% above a year earlier, leaving inflation well above the Fed's 2% target for a fifth straight year.
- Kevin Warsh rejected giving forward guidance at his post-meeting press conference, telling reporters that "market participants are learning to play the ball, not the referee."
- Warsh's remarks triggered sharp increases in long bond yields, prompting a Wall Street Journal headline declaring his "honeymoon with the bond market" already over.
- WSJ chief economics commentator Greg Ip pushed back on Warsh's framing, writing: "The Fed isn't a neutral umpire, it's the most important player in the game."
- At his April Senate confirmation hearing, Warsh told senators he made no promises to Trump about lower rates and vowed he wouldn't be "Trump's puppet."
- In their June projections, eight of 19 FOMC members expected at least one rate increase sometime this year.
Why it matters: With three FOMC dissents favoring an immediate hike and PCE inflation 1.7 points above target, the Fed's September decision pits Trump's rate-cut demands against bond investors who drove long rates higher after Warsh's silence — a credibility test the chair invited by refusing to guide markets at all.
