Fed Edges Closer to Rate Hikes in Kevin Warsh's First Fed Meeting

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**Christina Ruffini** (0:32)
I'm Christina Ruffini here with Emily Graffeo. Carol and Tim are on assignment, but we've got you covered. We've been watching this all afternoon. Obviously, the first remarks we've heard from Kevin Warsh in this job, what stood out to you, Emily?

**Emily Graffeo** (0:43)
Well, first of all, the remarks were shorter than we usually expect, particularly the-

**Christina Ruffini** (0:48)
Written and verbal remarks. Yeah, they're both shorter.

**Emily Graffeo** (0:50)
Yeah, I mean, that's definitely what stood out to me, Christina, and I think the markets are actually reacting perhaps more than I would have expected, particularly in the bond market.

**Christina Ruffini** (0:59)
All right, we're going to dig all into that shortly, but first, let's play some sound from Kevin Warsh's first time at the big podium.

**Kevin Warsh** (1:05)
At any institution, a change in leadership is a natural and timely opportunity to reaffirm its mission, to review current practices, and to consider whether those practices best meet our objectives. I'm appointing a task force in each of five areas that are central to the broad conduct of monetary policy. We recognize that inflation has been running well ahead of the Fed's long stated inflation goal of 2%.
That's been going on for more than five years. We've dropped forward guidance. This committee will deliver price stability.

**Emily Graffeo** (1:44)
And that was Fed Chair Kevin Warsh at today's press conference. Following the paper statement, we saw two-year yields spike sharply, and now we're seeing that move continued again. 16 basis points higher on the two-year, the next FOMC decision, July 29th, Christina. So we'll be waiting for that.

**Christina Ruffini** (2:01)
It's not that long away, yeah.

**Emily Graffeo** (2:03)
And we'll probably not get a lot of communication from the Fed in between, as this is a Fed that is committed to easing back that forward guidance and that communication.

**Christina Ruffini** (2:12)
But we did learn there's going to be a task force about the communication.

**Emily Graffeo** (2:15)
So we are going to ask our next guest about all of this. With more on today's Fed decision and market reaction, let's bring in Yelena Shulyatyeva, Senior US. Economist at The Conference Board, joining us right here in person. Let's just get your initial reaction to what we saw today.

**Yelena Shulyatyeva** (2:31)
A task force for everything, right? So that was my initial reaction. Well, actually today brings back memories when young Yelena started covering, started looking at the Fed under Chairman Greenspan. So like shorter statement, sharper communication, and I think that it means something by itself. Obviously, this is something we expected from the meeting today, like a revamp of communication in particular, right? So I think we're going to get some revamp in terms of the dot plot. That will probably go. We don't know that. There's a task force for that. But there were some unexpected things today as well. So some expected stuff and some unexpected. Unexpected part was how hawkish the committee was, right? The number of people who actually wanted to see rate hikes this year, the recommitment to the inflate.
Yeah, it was half. Nine out of 18 who submitted the dots and the recommitment to the inflation side of the mandate on top of a higher forecast for core inflation today.

**Christina Ruffini** (3:42)
How significant do you think it is that Warsh, when you saw the dots, there was one missing and everyone kind of assumed it was him and then he confirmed that in his remarks and he said he just doesn't think these forecasts are helpful right now given how uncertain everything is. Does he have a point or do you think it's, how significant is it that we didn't have a Warsh dot?

**Yelena Shulyatyeva** (4:01)
The dot plot has been a very interesting thing well before Warsh started.
I know a lot of people had different opinions about that and a lot of people wanted to get rid of it and so it's not an easy answer. Actually, I think it's a good thing that we will get that task force looking at different types of communications. Some things were great during the financial crisis, some things were great during the COVID crisis. How are we doing it now? What should be the approach? I think that's probably has been long overdue.

**Christina Ruffini** (4:38)