Episode summary
Instant Reaction: The Fed Decides | Bloomberg Surveillance
Bloomberg Surveillance
· · Hosts: Lisa Abramowicz, Scarlet Fu, Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr
Summary
The Federal Reserve held the benchmark rate at 3.5% to 3.75%, but the meeting signaled a notably more hawkish stance than markets expected. Officials’ projections split sharply: nine participants saw at least one quarter-point hike this year, six saw at least two hikes, and nine saw no move or a cut. The median dot for 2026 also moved up, and only 18 officials submitted a 2026 projection, feeding speculation that Kevin Warsh did not enter one.
The statement was shortened and sharpened around inflation, with no explicit reference to the employment mandate and a closing line saying the committee will deliver price stability. Several guests argued the change reflected broader concern that core inflation is sticky and no longer just an energy or tariff story. One guest said the Fed is reacting to a more persistent inflation backdrop, while another said the committee is trying not to repeat the mistakes of 2021-22.
Markets took the decision as hawkish, with the 2-year yield moving higher and stocks slipping. Guests said the real test will be how Warsh explains the dots, the balance sheet, and the Fed’s evolving framework in his first press conference, especially if he wants to push back on a rate-hike signal that is already showing up in market pricing.
Key takeaways
- Nine of 18 FOMC participants penciled in at least one rate hike this year, which guests said was a sharper hawkish signal than markets expected.
- The median 2026 dot rose and only 18 officials submitted a 2026 projection, prompting speculation that Kevin Warsh did not enter one.
- Guests said the new statement puts price stability ahead of the employment mandate, reflecting concern that core inflation is broadening beyond energy shocks.
- Several guests argued that the Fed is preparing markets for higher rates because inflation is proving sticky and may stay above target longer than expected.
Notable quotes
“The Worsh Feds holds the benchmark rate to 3 and a half to 3.75%. Significantly changes the statement and splits evenly over whether there will be a rate cut this year”
“Nine members see at least one increase this year with six of them seeing two moves, but nine see no moves or a cut”
“The statement concludes the committee will deliver price stability. All 19 members of the committee did submit economic forecasts”
“I think this is a Fed um that is sending a hawkish message”
“The market also believes that higher rates might be needed to tame inflation”
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 Worsh Feds holds the benchmark rate to 3 and a half to 3.75%.
Significantly changes the statement and splits evenly over whether there will be a rate cut this year. They see a rate increase this year. They see one cut each in 2027 and 2028.
Nine members see at least one increase this year with six of them seeing two moves, but nine see no moves or a cut. The median dot this year does move to 3.75% from 3.375%. However, for 2026, there are only 18 dots, suggesting the Fed chairman did not enter one.
He said he doesn't believe in the dot plot. Two members did not submit a dot for 2028. The statement was cut to four paragraphs.
The first the vote unanimous, then the decision along with a statement that the committee reaffirmed its policy of maintaining ample reserves in the banking system. The second and third graphs are the economic assessment activity is expanding at a solid pace despite elevated uncertainty that owes in part to conflict of the Middle East. Productivity growth and capital investment are strong.
Job gains have kept pace with the workforce and the unemployment rate has changed little. Inflation remains elev elevated relative to the committee's 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. There is no balance of risks anymore.
The statement concludes the committee will deliver price stability. All 19 members of the committee did submit economic forecasts. GDP this year 2.2% down 210 from March.
Unemployment will be 4.3% up a tenth. PCE headline inflation will come in at 3.6% significantly increased from 2.7% in their March projection.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed rate decision
- interest rates unchanged
- rate projections dot plot
- forward guidance
- federal funds target range
Watch the episode
Watch “Instant Reaction: The Fed Decides | Bloomberg Surveillance” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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