Episode summary
Instant Reaction: Fed Stands Pat, Says More Data Will Help Next Decision | Bloomberg Surveillance
Bloomberg Surveillance
· · 22 min · Hosts: Tom Keene, Jon Ferro, Lisa Abramowicz, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Kevin Warsh
Summary
The Fed left the target range unchanged at 3 3/4 to 4% and said it wants more information before deciding the next move, with inflation still above target and the economy still described as solid. The panel’s main argument was that the statement and press conference were more hawkish than the decision itself: the committee sounded determined to keep pressure on inflation, yet it did not hike again.
The discussion focused on why the chair’s communication did not explain the hold very clearly. A guest said the market did not seem to be saying the Fed was behind the curve, but that the chair did not really discuss the data or spell out whether this was risk-management, recalibration, or a response to financial conditions. Another panelist argued that the chair was trying to walk a line between hawkish rhetoric and a pause, but left the reaction function murky.
A recurring theme was that tighter financial conditions may be doing some of the Fed’s work for it, especially if the AI trade and broader risk assets weaken further. The panel also noted that Wall Street will now watch every Fed speaker and every meeting, especially with questions emerging about fewer meetings next year and what that means for pricing in rate cuts or hikes.
Key takeaways
- The Fed held rates at 3 3/4 to 4% while saying more information will help determine the policy stance, leaving December open.
- The chair’s rhetoric was hawkish, but the panel said he did not clearly explain why the Fed did not hike again.
- Panelists said financial conditions, including weakness in the AI trade, may already be tightening enough to do some of the Fed’s work.
- Market participants are now focused on every Fed speaker because the committee’s reaction function remains unclear.
- A guest argued the Fed’s communication was less about the decision itself than about signaling willingness to act if conditions require it.
Notable quotes
“The FOMC decided to maintain the target rate for the federal funds rate at 3 and 3/4 to 4%”
“the committee believes that the accumulation of more information will help it determine the policy stance appropriate to ensure a timely return of inflation to the 2% goal”
“There appears to be a disconnect between the rhetoric and the policy from the Fed chair Kevin Walsh”
“I think the market was okay with policy. What I was hoping to get from chairwash, which we didn't really get, was explain the decision”
“he wants to walk away from modern monetary analysis and the foundation of that”
How the episode opens
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 FOMC decided to maintain the target rate for the federal funds rate at 3 and 3/4 to 4%. In support of the Federal Reserve's dual mandate, the committee believes that the accumulation of more information will help it determine the policy stance appropriate to ensure a timely return of inflation to the 2% goal. The committee will deliver price stability.
Feet chair Kevin Walsh for I'm going to speak on behalf of a lot of people on trade desks around the world. I think at one point in that news conference, everybody started looking out the window to see what was happening elsewhere because there was a moment in that news conference where we stopped learning anything about anything. Equity markets this afternoon shaping up as follows.
On the S&P 500 up a third of 1% on the NASDAQ up by 0.4. In the bond market, twos, 10, and 30s. Yields shaping up as follows.
This afternoon, two's down three basis points of 470. 10's up four, 30s up five. There appears to be a disconnect between the rhetoric and the policy from the Fed chair Kevin Walsh.
Domestic spending has been resilient. Productivity growth is strong and capital investment robust. Job gains have kept pace with the workforce and the unemployment rate has changed little.
But inflation remains elevated. Inflation is too high. The economy is strong.
Yet the Fed decided to hold the opening statement more consistent with the Fed share that just hiked interest rates. Never mind keeping them unchanged. So what had changed and the one thing that he did open the door to was the potential that market volatility started to give the sense that maybe something else was going on that they needed to monitor.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed policy
- interest rates
- inflation
- forward guidance
- december meeting
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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