- Fed Chairman Kevin Warsh delivered the first rate increase since 2023 last week, a unanimous quarter-point hike, and appears likely to support additional hikes if inflation remains a problem.
- Inflation is running at 3.7% on the Fed's preferred PCE gauge in July, above the 2% target for more than 5½ years.
- The 2-year Treasury yield traded nearly a full percentage point above the effective federal funds rate on Wednesday, the largest spread since 2023, indicating traders expect more rate increases.
- Warsh dropped the traditional accommodative/neutral/restrictive framing, saying the neutral-rate concept is useful academically but had no bearing on the decision to hike, and instead leans on broad financial conditions.
- Balance-sheet reduction, a key Warsh priority, has not advanced because inflation is more pressing, and five task forces on Fed practices report back early next year.
引述
“But now that the Fed has hiked, how will he judge whether to hike again, and when to stop?”
“These and other indicators should inform the Fed's near-term outlook on economic activity and inflation throughout the business cycle.”
“the level and change in asset prices across sectors ... the prices and trading volumes of Treasury securities ... the foreign exchange value of the dollar ... the cost and availability of credit ... and the price of a broad set of commodities.”