Between a hike and a hard place

[upbeat music] So Anna, the market sees a roughly 90% chance that the Fed raises rates today.

That's moved quite a bit just in the last few days.

A week ago it was seen as almost 50/50.

Now, the market's got used to having a lot of forward guidance.

It's got used to knowing in advance what the Fed is going to do.

We know that Kevin Warsh doesn't like that, but he's going to have to give some kind of forward guidance today, isn't he, when he's asked about where the Fed is going from here?

Well, it'll be interesting to see.

I mean, I think, yes, as you say, everyone expects we're gonna get a rate hike today, 25 basis points, but the real key is what happens moving forward.

The Fed tends to not do one and done.

If you look historically, that's, that's very uncommon, which means we likely could get multiple rate hikes, which really does put Warsh in an interesting position.

As we all know, he was appointed by President Trump, and President Trump has made his preference for rate cuts very clear.

Now, no one thinks, perhaps ex- except for the president, that we should be cutting rates right now.

Just if you look at how the economy is running hot, inflation has been above target for over five years.

That being said, you know, th- this is the political reality.

In a way, this could actually give Warsh an opportunity because one of the issues we've seen is that on the yield curve, yields at the longer end, particularly the, you know, the 10-year, have been rising.

The 30-year has obs- obviously been rising quite a bit, but the 10-year is really what we're zeroed in on.

And part of that has been credibility concerns about Warsh and this Fed's ability and willingness to do what it needs to fight inflation.

There is so much pointing to a rate hike, so Warsh can probably use that as cover, hike rates, and by doing that, gain some more credibility with markets.

Well, most of his colleagues on the FOMC have essentially said in recent days that the data points to a hike and they would vote for one.

Can Warsh lead from behind in a sense here, and perhaps hope that President Trump's ire goes to colleagues on the FOMC? He did say, the president, recently that Warsh was trying to do the right thing, but a hostile FOMC was holding him back.

Yeah.

E- e- exactly.

I, I think in a way that's, that's likely the type of signaling we could get.

I don't necessarily think that will be the signaling we will get at the actual, uh, talk from Warsh because he wouldn't want in any way to come out and be appearing to suggest that he does not agree with the decision of the FOMC, obviously.

There could be dissents, but they wanna show that there is a, you know, unified messaging here that's very important for markets.