Episode summary
Instant Reaction: Fed Chair Kevin Warsh's News Conference | Bloomberg Daybreak: US Edition
Bloomberg Daybreak: US Edition
· · 36 min · Hosts: Tom Keene, Jon Ferro, Lisa Abramowicz · Guests: Kevin Warsh, Lorie Logan, Beth Hammack, Neel Kashkari
Summary
The Fed left interest rates unchanged in a 9-3 vote, keeping the benchmark federal funds rate at 3.5% to 3.75%, but the decision was immediately overshadowed by a confusing press conference from Fed Chair Kevin Warsh. He insisted the hold was not inertia and repeated that the central bank remains committed to bringing inflation down, even as three regional presidents dissented in favor of a quarter-point hike.
The hosts argued that the bigger market signal came from the lack of clear forward guidance. They said the press conference left investors trying to infer the Fed’s reaction function from the bond market itself, rather than from the chair’s answers. Market moves reflected that uncertainty: two-year yields fell while 30-year yields surged, with the long end climbing to the highest levels since 2007 and mortgage rates expected to rise further.
Guests said the long-end selloff raised questions about credibility, communication, and whether the market now expects the Fed to be forced into a hike at the next meeting. Some argued the Fed’s reduced guidance is creating more volatility, while others said the data could still bail the committee out if inflation softens. The key debate is whether Warsh is being deliberately opaque or simply letting markets do the work for him.
Key takeaways
- The committee voted 9-3 to keep rates unchanged at 3.5% to 3.75%, with Logan, Hammack and Kashkari dissenting for a hike.
- The hosts said Kevin Warsh gave markets little new guidance, and that silence helped trigger a sharp steepening in the yield curve.
- Several guests said the 30-year yield move, not the front end, was the key signal because it raises borrowing costs and tightens financial conditions.
- Stephanie Roth argued markets “just don't believe” the Fed, and said softer inflation data would be the main thing that could bail Warsh out.
- Torson Slok said the long end’s reaction creates a credibility test for the Fed and may increase the odds of a September hike if data stay firm.
Notable quotes
“Nominal and real yields are materially higher across the Treasury curve. In fact, some of the increases in market interest rates between FOMC meetings are among the most significant in the last two decades”
“Market participants are learning to play the ball, not the referee. And market prices will continue to respond in the direction and magnitude they see fit”
“We didn't get any guidance any direction. And it was also a little bit complicated to figure out what was the basis for the decision today”
“what was also the interesting question is when he was asked about well if markets then are predicting say a 80% 90% chance of a hike going into a meeting are you going to deliver on that”
“I think markets just don't believe them. The thing is I do think that the Fed will ult that the data will ultimately bail out the Fed to some extent”
How the episode opens
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From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed decision
- federal funds rate
- inflation
- fomc vote
- dissenting policymakers
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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