Warsh sold a hike the market already owned
The Federal Reserve’s rate-setting committee voted unanimously Wednesday to raise its main policy rate by a quarter-percentage point to a range of 3.75% to 4%, the Guardian reports. It is the first raise since July 2023.
The FOMC is the Fed committee that sets the main U.S. interest rate. A 25bp hike means rates up by 0.25 percentage points. “Restrictive” means rates high enough to slow the economy.
Chair Kevin Warsh told reporters inflation is “too high and has been for too long,” and that this summer’s readings do not show underlying trends have “meaningfully improved.” New projections: a majority of officials penciled in another hike before year-end, and four officials see 4.25% to 4.5% by end of year. Officials see inflation reaching the 2% goal roughly by 2029.
Fortune reports the selling started during the press conference. Warsh said he would be “hard pressed to describe broad financial conditions as restrictive,” and that the committee “removed a dose of accommodation.”
He distanced himself from the dots, the committee’s published rate projections: “Those aren’t my forecasts… Those are the forecasts of my 18 colleagues.” “I’m not in the forward guidance business.”
ABC News prints the same unanimous 25bp move and close figures: the Dow closed down 630 points, or 1.2%, with the S&P off 0.4% and the Nasdaq off 0.01%. Fortune’s session print had the S&P off about 1% and the Dow off about 1.7%, or more than 700 points, with the 10-year yield near 5%.
Trump Truth Social, via the Guardian, said rates should be 1% or less. Warsh called independence a “two-way street” and declined to answer how Trump would react.
Markets had spent the morning pricing a hike. The surprise was the chair refusing to rubber-stamp a one-and-done path and saying money was not already tight enough.
The decision was unanimous. The presser was not a pause speech.