It is a close call. My bet is they won't hike rates today. Warsh has the task forces going on and launching a rate hike cycle before it, would kill the point of the task forces. He can say that the last CPI reading was OK, no sign of inflation spillover from higher commodity prices, long-term inflation expectations are stable and until the latter is true, higher oil prices reduces disposable income through higher fuel prices and of course he can use the war is a temporarily thing.
But again, it is a close call. The long-term bond yields are ugly, but it is mostly a term premium problem, not much the Fed can do here.
Ive been enjoying your past couple of interviews. Fell asleep listening to you and Andy last night. His testimony reaffirmed my silver and gold concerns as I am long and heavy there.
I still laugh when I listen to commentators and financial analysts cry about "high" rates. My first used car loan...17% my first mortgage....7% and I was ecstatic about that mortgage rate.
This country has become so fragile. Neurotic really--so used to cheap money, politicians popularizing tax cuts, and unleashing vast stimulus that the country has forgotten how to tighten their belts. The helicopter mom phenom isn't just limited to GenX. All of which is somewhat fine if we actually had the money but we don't. Whereas three decades ago a quarter point hike wouldn't raise an eyebrow, now an entire casino economy worries if mommy is going to continue to save us.
Good! I'm in cash and with the latest offering of X-money to more people and offering 6% interest. FWIW my US Bank card just announced 3% rewards on gas and groceries for a year. I haven't used that card in some time.
I am expecting credit card companies, and banks, to wake up to the competition from X-money and start offering decent interest rates to their customers. That's what banks used to do.
People like myself that have cash, and no debt, want higher rates.
Yes I'm looking to buy raw land and build a modest home. I will probably pay cash for the land and will be able to easily put 20% to 40% down to build the house and finance the rest using a 15-year loan.
Both of my first homes had interest rates of 7.25% and 7.5%.
Interesting surmise - but would anyone "believe" the "gesture". I'm with Luke Groman at this point. The fedres can "break" the bond market to protect the dollar or the dollar to protect the (nominal) bond market. Guess which door they're going to pick. Three guesses - first two don't count.
Nice reverie, but you credit his independence and creativity far too much. He's just been making safe noises to suggest independence from his overlord. Won't raise until he feels he has too and particularly not now after a facially benign/improving June CPI. Not saying I don't like the idea, but I'll sell puts to anyone here on any proposition based on the assumption that a T-Term-2 appointee will show real backbone or character while employed as his household servant (except, maybe, when he reaches full "lame duck" mode, which could start as early as midterms, but more likely H2 2027). That doesn't rule out rate hike when markets expect it later in the year because that's "safe" not "backbone".
The Iran war is the biggest unforced error of American foreign policy in the 21st century. The silver lining is that both political parties have so little support now, it creates an opportunity to force the unpopular but necessary medicine down the throat of the American economy. Does Warsh have he b@lls to do that? We’ll find out soon enough.
I’d also like a hike. As mentioned it would be Warsh planting a flag and making a statement.
Unfortunately I don’t think it’ll happen. I think behind it all he has a fear of Trump and the rant that would happen. I think to him that optic matters.
Hope I’m wrong though.
I’m also very interested in what comments Microsoft makes after earnings.
Like it matters and do we care? This is more circus theater than anything relevant. Over the last 65 years, the Feds have destroyed the value of the buckaroo by over 90%. I see no joy in this as this trend continues despite what the silly Fed does. Maybe a bout of deflation would work wonders despite the Fed being terrified of it.
I wonder if we let interest rates float where they may go, without the Fed trying to steer this rudderless ship, what would they be? My guess is around 6-7%. The DC Cesspool is cooked anyway as the deficits continue to rise...even with 1% rates. So this little tinkle upon our faces means relatively nothing as the ship takes on more water every fricking day.
I find the argument quite compelling and, in principle, I'm very sympathetic to the idea of a symbolic rate hike. Re-establishing the Fed's inflation-fighting credibility and reminding markets that monetary policy exists to preserve price stability—not to support asset prices—would be a healthy shift after years of perceived "Fed put" expectations.
My hesitation isn't with the objective, but with the environment in which the Fed now operates.
The U.S. Treasury faces an extraordinary amount of debt that must be refinanced over the coming years. While the Fed is institutionally independent and its mandate is not to minimise the government's borrowing costs, its decisions inevitably influence Treasury financing conditions. A surprise rate hike could easily affect not just overnight rates but expectations across the entire yield curve. If investors interpret the move as the start of a more hawkish or less predictable policy regime, medium- and long-term Treasury yields could also rise.
That creates a difficult trade-off. The proposed hike may be intended as a symbolic signal, but it could also raise the Treasury's refinancing costs and, perhaps more importantly, make them less predictable. Given the scale of upcoming debt rollovers, even relatively small moves in yields can translate into meaningful increases in interest expense over time.
Of course, it's also possible that a credible anti-inflation stance could lower long-term inflation expectations and keep long-end yields contained. But that outcome is far from guaranteed, which is precisely why I'm not convinced the Fed has the freedom to conduct this kind of experiment today.
So while I agree with the broader message—that restoring credibility and reducing moral hazard are worthwhile goals—I wonder whether today's fiscal realities have made that option much more constrained than it would have been in the past.
Warsh's real concern comes down to the 10-year yield. If he had reasonable belief that a move today would help stabilize the 10-year, sure. But there seems to be zero evidence that it wouldn't hurt more than help.
It is a close call. My bet is they won't hike rates today. Warsh has the task forces going on and launching a rate hike cycle before it, would kill the point of the task forces. He can say that the last CPI reading was OK, no sign of inflation spillover from higher commodity prices, long-term inflation expectations are stable and until the latter is true, higher oil prices reduces disposable income through higher fuel prices and of course he can use the war is a temporarily thing.
But again, it is a close call. The long-term bond yields are ugly, but it is mostly a term premium problem, not much the Fed can do here.
Ive been enjoying your past couple of interviews. Fell asleep listening to you and Andy last night. His testimony reaffirmed my silver and gold concerns as I am long and heavy there.
I still laugh when I listen to commentators and financial analysts cry about "high" rates. My first used car loan...17% my first mortgage....7% and I was ecstatic about that mortgage rate.
My guess is UNC today. 🍿
🍻 to another day above ground.
Not sure "fell asleep listening" is the compliment I'm looking for...
Just joking. Thanks for the continued support :)
I'm writing a fairy tale about a Fed that cares more about Main street than Wall Street.
It'll probably sell as well as my other book " How to Successfully work for Free".
They need to figure out how to pay for war first. Things are just getting started. The next President will go all in.
Not going to happen
I'm old and sad that THIS is what we're leaving the next Generation. This isn't what we inherited. It's no wonder Socialism looks good to them.
This country has become so fragile. Neurotic really--so used to cheap money, politicians popularizing tax cuts, and unleashing vast stimulus that the country has forgotten how to tighten their belts. The helicopter mom phenom isn't just limited to GenX. All of which is somewhat fine if we actually had the money but we don't. Whereas three decades ago a quarter point hike wouldn't raise an eyebrow, now an entire casino economy worries if mommy is going to continue to save us.
Good! I'm in cash and with the latest offering of X-money to more people and offering 6% interest. FWIW my US Bank card just announced 3% rewards on gas and groceries for a year. I haven't used that card in some time.
I am expecting credit card companies, and banks, to wake up to the competition from X-money and start offering decent interest rates to their customers. That's what banks used to do.
People like myself that have cash, and no debt, want higher rates.
Yes I'm looking to buy raw land and build a modest home. I will probably pay cash for the land and will be able to easily put 20% to 40% down to build the house and finance the rest using a 15-year loan.
Both of my first homes had interest rates of 7.25% and 7.5%.
Interesting surmise - but would anyone "believe" the "gesture". I'm with Luke Groman at this point. The fedres can "break" the bond market to protect the dollar or the dollar to protect the (nominal) bond market. Guess which door they're going to pick. Three guesses - first two don't count.
Nice reverie, but you credit his independence and creativity far too much. He's just been making safe noises to suggest independence from his overlord. Won't raise until he feels he has too and particularly not now after a facially benign/improving June CPI. Not saying I don't like the idea, but I'll sell puts to anyone here on any proposition based on the assumption that a T-Term-2 appointee will show real backbone or character while employed as his household servant (except, maybe, when he reaches full "lame duck" mode, which could start as early as midterms, but more likely H2 2027). That doesn't rule out rate hike when markets expect it later in the year because that's "safe" not "backbone".
The Iran war is the biggest unforced error of American foreign policy in the 21st century. The silver lining is that both political parties have so little support now, it creates an opportunity to force the unpopular but necessary medicine down the throat of the American economy. Does Warsh have he b@lls to do that? We’ll find out soon enough.
Great humor and hopium for a Weds morning! Zero chance of a rate hike. Zeee-row.
I’d also like a hike. As mentioned it would be Warsh planting a flag and making a statement.
Unfortunately I don’t think it’ll happen. I think behind it all he has a fear of Trump and the rant that would happen. I think to him that optic matters.
Hope I’m wrong though.
I’m also very interested in what comments Microsoft makes after earnings.
Like it matters and do we care? This is more circus theater than anything relevant. Over the last 65 years, the Feds have destroyed the value of the buckaroo by over 90%. I see no joy in this as this trend continues despite what the silly Fed does. Maybe a bout of deflation would work wonders despite the Fed being terrified of it.
I wonder if we let interest rates float where they may go, without the Fed trying to steer this rudderless ship, what would they be? My guess is around 6-7%. The DC Cesspool is cooked anyway as the deficits continue to rise...even with 1% rates. So this little tinkle upon our faces means relatively nothing as the ship takes on more water every fricking day.
I find the argument quite compelling and, in principle, I'm very sympathetic to the idea of a symbolic rate hike. Re-establishing the Fed's inflation-fighting credibility and reminding markets that monetary policy exists to preserve price stability—not to support asset prices—would be a healthy shift after years of perceived "Fed put" expectations.
My hesitation isn't with the objective, but with the environment in which the Fed now operates.
The U.S. Treasury faces an extraordinary amount of debt that must be refinanced over the coming years. While the Fed is institutionally independent and its mandate is not to minimise the government's borrowing costs, its decisions inevitably influence Treasury financing conditions. A surprise rate hike could easily affect not just overnight rates but expectations across the entire yield curve. If investors interpret the move as the start of a more hawkish or less predictable policy regime, medium- and long-term Treasury yields could also rise.
That creates a difficult trade-off. The proposed hike may be intended as a symbolic signal, but it could also raise the Treasury's refinancing costs and, perhaps more importantly, make them less predictable. Given the scale of upcoming debt rollovers, even relatively small moves in yields can translate into meaningful increases in interest expense over time.
Of course, it's also possible that a credible anti-inflation stance could lower long-term inflation expectations and keep long-end yields contained. But that outcome is far from guaranteed, which is precisely why I'm not convinced the Fed has the freedom to conduct this kind of experiment today.
So while I agree with the broader message—that restoring credibility and reducing moral hazard are worthwhile goals—I wonder whether today's fiscal realities have made that option much more constrained than it would have been in the past.
Warsh's real concern comes down to the 10-year yield. If he had reasonable belief that a move today would help stabilize the 10-year, sure. But there seems to be zero evidence that it wouldn't hurt more than help.