<\/p>\n
It ain\u2019t pretty.<\/p>\n
Kevin Warsh\u2019s first week as Federal Reserve Chair comes packed withhawkish expectations both inside and outside the central bank that geopolitical and economic factors may cause the Fed to raise the benchmark Federal Funds Rate sooner than later instead of a long-expected cut to the costs of short-term borrowing.<\/p>\n
But those expectations could reverse if there is a timely end to the three-month Iran War that will cease energy price spikes, reduce heightened inflation risk and anchor the bond market.\u00a0<\/p>\n
As these conditions normalize, policy doves expect an easing that will allow the Fed to lower interest rates — which President Donald Trump has been demanding since the beginning of his second term.<\/p>\n
The big question is timing.<\/p>\n
The latest U.S. economic data reflecting rising price pressures and a stabilizing labor market plus a jittery Treasury bond market has brought increasingly hawkish outlooks from some Fed officials, big banks and market watchers.<\/p>\n
The widely-respected CME Group FedWatch Tool is predicting a near 100% probability that the central bankers will vote to hold rates steady at the June 16-17 Federal Open Market Committee meeting.<\/p>\n
As I\u2019ve reported, futures traders expect a near 70% chance of rate hikes to follow including a 43% chance of a rate hike at the December FOMC meeting.<\/p>\n
But not all experts agree, including John Briggs, head of U.S. rates strategy at Natixis, who told Morningstar that he is skeptical of that particular outcome.<\/p>\n
Warsh campaigned for lower Fed interest rates\u00a0<\/p>\n
Kevin Warsh took over the Chair role on May 22 — the same day the Dow closed at a record high.\u00a0<\/p>\n
But bond yields rattled upwards and inflation forecasts rose due to surging oil prices as the Iran peace process drags on.\u00a0<\/p>\n
Thus sparking signals from some Fed officials and many analysts to suggest that the policy-making FOMC will reverse its own earlier assumptions of rate cuts in the short term and consider the strong possibility of interest-rate hikes as soon as the end of the year if not sooner.<\/p>\n
This is definitely not what Trump was expecting when he nominated Warsh in January after a months-long campaign to find whom the president defined as \u201cloyal\u201d Fed Chair who would follow his monetary policy agenda which included slashing the benchmark Federal Funds Rate to 1% or less.<\/p>\n
Warsh, a former Fed governor, has long been critical of the central bank and has called for lower interest rates as well as a smaller balance sheet and a reduced communications strategy.<\/p>\n
He muted some critics concerned about Fed independence from political and partisan interference by saying he had not discussed interest rates with Trump during the Chair interviews or afterwards.\u00a0\u00a0<\/p>\n
Federal Reserve Bank of New York via FRED®<\/p>\n
Fed\u2019s Waller reverses dovish outlook on Fed interest rates<\/p>\n
Fed Governor Christopher J. Waller signaled a major hawkish shift the same day as Warsh\u2019s swearing-in ceremony at the White House.<\/p>\n
Waller joined fellow Fed officials in warning that the central bank may need to raise interest rates this year due to the inflation risks from the Iran War.\u00a0<\/p>\n
Related: Investors send a bold Fed rate-cut signal to new Fed chair<\/p>\n
The central bank\u2019s current \u201cwait-and-see\u201d approach to holding rates steady is appropriate for now, but Waller said he expects longer term tightening may be necessary for the U.S. economy if supply-shock inflation doesn\u2019t prove transitory.<\/p>\n
\u201cI can no longer rule out rate hikes further down the road if inflation does not abate soon,\u201d Waller said in May 22 prepared remarks.<\/p>\n
April FOMC\u00a0 held Fed interest rates steady\u00a0<\/p>\n
The Federal Open Market Committee, in a decisive 8-4 vote on April 29, held the benchmark Federal Funds Rate at 3.50% to 3.75%.<\/p>\n
It was the first time in more than 30 years the FOMC vote reflected four dissents.<\/p>\n
It was the FOMC\u2019s third pause after cutting rates by 75 basis points during its last three meetings of 2025 to boost a weakening labor market.<\/p>\n
Three of those dissents were by regional bank presidents — Cleveland Fed President Beth M. Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie K. Logan — because the post-meeting\u2019s statement did not have language that supported \u201cinclusion of an easing bias in the statement at this time.\u201d\u00a0<\/p>\n
Fed April FOMC minutes show strong hawkish shift<\/p>\n
But the minutes of the April FOMC meeting, released May 20, showed an even more hawkish shift from policy makers with increasing interest in possible easing due to\u00a0 inflation risks.<\/p>\n
\u201cA majority of participants\u201d highlighted\u2026that some policy firming would likely become appropriate if inflation were to continue to run persistently above 2%.As a result, \u201cmany participants indicated\u201d that they would have preferred removing the language from the postmeeting statement that suggested an easing bias regarding the likely direction of the committee’s future interest-rate decisions.\u00a0Briggs forecasts next Fed interest-rate move<\/p>\n
Anticipation is growing about the June FOMC meeting, especially if Warsh will be issuing any forward guidance either via a quarterly dot plot or a post-meeting press conference. He has been coolly negative about both. <\/p>\n
\u201cIf the Fed is going to raise rates because of inflation worries, it\u2019s not going to do it once. It\u2019s going to do it two or three times,\u201d Briggs said.<\/p>\n
More Federal Reserve:<\/p>\n
Federal reserve reveals troubling reality about wealthy AmericansFidelity, Fed raise red flags on 401(k)s and IRAs<\/p>\n
But he added that investors are wary of making the same mistake they did in 2022, when the bond market and central bankers saw the hike in oil prices after Russia invaded Ukraine as transitory.\u00a0<\/p>\n
Briggs said that given the current economic outlook, his base case is that the Fed keeps rates steady as long as the labor market remains stable.<\/p>\n
\u201cI think they end up staying on hold for a long time,\u201d he said.<\/p>\n
Related: Fed officials double down on blunt rate-cut message<\/p>\n
#Top #analyst #hurls #warning #Fed #ratehike #odds<\/p>\n","protected":false},"excerpt":{"rendered":"
It ain\u2019t pretty. Kevin Warsh\u2019s first week as Federal Reserve Chair comes packed withhawkish expectations…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[259],"tags":[333,1508,13199,2586,11999,187,856],"_links":{"self":[{"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/posts\/7301"}],"collection":[{"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=7301"}],"version-history":[{"count":0,"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/posts\/7301\/revisions"}],"wp:attachment":[{"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7301"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7301"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7301"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}