Bond Bonanza, Driving Oil Action, A GOP Guarantee? 9/10/26

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Kelly Evans (0:57)

You're listening to The Exchange. Here's today's show.

Thank you very much, Scott. Oil hits $100 a barrel today for WTI, and mortgage rates pop back above 7%.

I'm Kelli Evans, and welcome to The Exchange. The Nasdaq 100 is the worst performer today, down about 3 quarters of a percent, as the 10 year treasury yield jumps above 4.9%.

491 there. We mirrored 492 earlier. European Central Bank hiking rates today will debate whether our Fed should do the same next week. Plus, Jeff Currie, we were just shouting over to him. He weighs in on energy prices, as Saudi production hits its lowest since 1990 Gasoline, $4.27 nationwide today. Diesel about to hit $6 a gallon for the first time. And the treasury kicks off its buybacks of long-term debt this hour. Yields have only moved up since its plans were first announced. Our market's trying to do to Besant. What Besant did to the Bank of England 30 years ago, we'll discuss. But let's begin with shifting expectations for Fed rate hikes. Economist Claudia Somm writing earlier this week that she is no longer confident inflation will get back to target in the next year or two without Fed rate hikes. Our next guest has also changed her call, now expects two rate hikes. Kathy Bajancic is the chief economist at Nationwide. Steve Leesman is with us as well. He's our senior economic supporter. Quickly, Steve, I just wanted to start with you. We did have PPI today. It was about as expected, correct me if I'm wrong.

Steve Leesman (2:22)

No relief there, essentially. The key is that Jeff Currie is standing there in the darkness.

Kelly Evans (2:27)

Bingo.

Steve Leesman (2:27)

With his call that has been a dark call, that is now seeing the light of day about what's happening with oil prices. And from my standpoint, covering the economy, thinking about how the Fed covers, you doesn't seem like you can say this surge in oil prices is one off anymore. Unless you want to say it's one off for a very long while.

Kelly Evans (2:48)

Seventy percent, is that right? Is where the odds are for a hike next week?

Steve Leesman (2:51)

Seventy percent now, it's leaning that way, and I'm leaning that way. I want to see the CPI report tomorrow, but I don't think it's one report. I think that if you look at the drift of things since the war spoke in Jackson Hole, much higher oil prices, stronger jobs numbers, and you have this sort of gathering idea here that they ought to hike, and plus there's a credibility issue that Kevin Warsh could do himself an awful lot of good with a rate hike.

Kelly Evans (3:20)

Although, and Kathy, I'll kind of comment turn to you on this, but Michael Falkender was on the show yesterday, obviously worked at Treasury with Bussen. He said that markets misunderstood what Warsh was saying in Jackson Hole, Steve. He said that he was signaling balance sheet action, not rate hikes.

Steve Leesman (3:35)

Yeah, I don't agree with Mr. Falkender on that. I think he's a really smart guy, but Kevin is not in a place now where he can start using the balance sheet for policy. He wants to do that, and he can get there, and he probably will get there. But for addressing the immediate things in front of him and the immediate need to address policy, I don't think he's in a place where he has the committee behind him to use the balance sheet to address inflation.

Kelly Evans (3:58)

Kathy, jump in here. Why did you change your call looking for two hikes now this year?

Kathy Bajancic (4:02)