Episode summary
Instant Reaction: The Fed Decides | Bloomberg Daybreak: US Edition
Bloomberg Daybreak: US Edition
· · 36 min · Hosts: Tom Keene, Jon Ferro, Lisa Abramowicz
Summary
The panel framed the Fed’s decision to leave rates unchanged as a hold that was widely expected, but the 9-3 vote made the bigger story the three dissenters pushing for a quarter-point hike. The host and guests focused on Lorie Logan, Beth Hammack and Neel Kashkari as evidence that the committee’s direction of travel may be shifting toward tighter policy, even though the statement itself was nearly identical to June’s and offered no forward guidance.
Several guests argued that the dissents mattered more than the statement language because they signal growing concern about inflation remaining too high for too long. One guest said the market had only priced in about a 30% chance of a hike, but that the dissent count was the key surprise. Another said the board’s lack of dissent made a rate hike in September easier to imagine than if governors had joined the regional presidents.
The discussion then shifted to what Chair Kevin Walsh might say in the press conference and whether he can quantify the reaction function. Guests debated whether the Fed is now moving back toward a more normal, pre-GFC rate regime, with some arguing neutral rates may be higher than previously assumed and that the long end of the Treasury market is already telling that story.
Key takeaways
- The host and guests treated the 9-3 vote as the real news, with Logan, Hammack and Kashkari dissenting for a hike.
- Several guests said the unchanged statement gave no new guidance, so the next move depends on Walsh’s press conference and coming data.
- One guest argued the dissents point toward a September hike, while another said four dissents would strengthen that case further.
- Guests said higher inflation, stronger capex demand and a tighter capital environment may mean neutral rates are higher than markets once expected.
- The panel saw the long end of the Treasury market as a warning that the Fed may be behind inflation rather than ahead of it.
Notable quotes
“The news is sparse. No change in rates. Nine in favor, three descents. Logan, Hammock, and Qashqari”
“there is not a word of difference between the June statement and this one. Economic activity is expanding at a solid pace”
“there truly was about a 30% chance of a fed rate hike at this meeting and that chance was not necessarily fulfilled”
“I think the three descents are more important than that last statement. I think that it shows that they're starting to migrate towards tightening policy”
“I think the descents tell you the direction of travel. It will be very tough for Walsh to hold the line into September”
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Bloomberg Audio Studios, podcasts, radio, news. — This is a breaking news update from Bloomberg. Instant reaction and analysis from our 3,000 journalists and analysts around the world. — The news is sparse. No change in rates. Nine in favor, three descents. Logan, Hammock, and Qashqari. Other than that, there is not a word of difference between the June statement and this one.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed policy decision
- interest rates
- federal funds rate
- inflation outlook
- fomc voting split
Watch the episode
Watch “Instant Reaction: The Fed Decides | Bloomberg Daybreak: US Edition” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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