- The Fed raised its benchmark rate by a quarter point to a 3.75%-4% target range, the first hike since 2023, and Chair Kevin Warsh framed it as removing 'a dose of accommodation' rather than tightening.
- Warsh rejected the neutral-rate framework as having 'no operational effect' on decisions, adding uncertainty about how far the Fed will go with rate hikes.
- Market-implied odds of an October hike rose to near 58% from 42% a week earlier; Goldman Sachs and Bank of America added October hikes to forecasts, with BofA also expecting a December move.
- Evercore ISI's Krishna Guha called the phrase the 'one stand-out hawkish element' of Warsh's commentary and said it raises the possibility of an open-ended approach to the number of hikes required.
Quotes
“This was not a mistake; it was a phrase he repeated several times and looked very much a deliberate choice to frame policy in this way”
“useful academically. It's a discussion to help us think about policy. Do I think it has any operational effect of decisions that we make today? No, I don't.”
“a dose of accommodation”