Instant Reaction: Fed Chair Kevin Warsh on Fed Policy

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Kevin Warsh (0:20)

Today's action starts to show we're serious about this, and we will deliver on the price stability objective. And as the statement said, we'll do it on a timelier basis.

Jon Ferro (0:34)

Fed Chair Kevin Warsh, wrapping up the news conference in Washington, DC, a 25 basis point interest rate hike. The forecast implied there's one more to come this year, and a lean to perhaps even more in 2027 Live from New York City this afternoon, good afternoon to you all. This is the price action, a hawkish opening statement from a Fed Chairman that happened to drive equities lower down on the session by 0.4% in the bond market. 2s, 10s, 30s just sit on the front end of the curve. Yields up 6 basis points on 2s. We breach 470 on a 2-year. We're higher for a seventh consecutive session, the highest yield at the front end of the curve since July 2024 As for the hawkish speak, take a listen to the Chairman of the Federal Reserve.

Kevin Warsh (1:17)

Inflation remains elevated.

Today's policy action will support a timelier return to the committee's 2% goal. I would be hard pressed to describe broad financial conditions as restrictive. This view was widely shared by the committee. So we removed a dose of accommodation.

Jon Ferro (1:38)

We removed a dose of accommodation. Just a subtle sign that maybe you'll have to do just a little bit more of that. This line from the Fed Chairman. Today's action starts to show that we're serious about this. It starts to show that we're serious about this. This market believe in there's more action to come from this Fed share.

Lisa Abramowicz (1:54)

It isn't just a statement of economic projections. And Michael McKee asked a great question of how do you reconcile a statement of economic projections that doesn't see inflation at 2% until 2029?

This Fed chair said, those are not my projections. We will deliver price stability. Today's action, to your point, starts to show we're serious about this. And that is where you saw the inflection lower when it comes to stock valuations and where you saw that inflection higher in the front end of the yield curve.

Jon Ferro (2:20)

So Stephanie Rothwell's research standing by, we'll get to her in just a moment. We'll speak to Neil Duttre as well. He's going to jump on for us too. Before we get into all of this, I just want to sit on the tone of the news conference. Sitting at home watching this, you might have noticed a subtle difference here. It felt tighter. Q&A, the cadence was different. Mike McKee before coming into this told us that they weren't allowed to ask follow up questions to the Fed chair. That's why this lasted only 30 minutes. Everything was tighter. He was far more selective about what he answered. There were a few questions wasted on the president because he was never going to engage in any of that. But a different cadence to this news conference, certainly compared to what we heard last time around, back in July.

Lisa Abramowicz (2:57)

Arguably, he was speaking to somebody else as well because the number of press members from a wider range of press were also called on. That was notable. To me, it was also interesting that he was trying to retrain people, saying if you ask two part questions, I'll pick which part I want to answer.

Essentially, that was also a very different tone. Tighter with a much clearer message, which is we need to do more. Right now, these financial conditions are not restrictive in any way, shape or form.

Tom Keene (3:22)

I'm going to keep my opinion out of it because we've got wonderful guests coming up. I will editorialize that was a disaster. As Lisa's noticed, it moved like a hockey stick move, which is what Ben Bernanke would call it. There was a hockey stick move and I had a single sentence, and this is the heart of the matter, and that he said, we're looking at discipline, not a decision. He's running an MBA course out at Stanford, and the rest of the economists are trying to do macroeconomics.

Lisa Abramowicz (3:48)

I'm not sure I would agree. I don't know that he would think that this was actually a disaster because ultimately what you saw is a flattening in the yield curve and you saw a capping at the long end of eight long FVLs.

Tom Keene (3:57)

The 30-year real yield had three basis points to a new record high. I got 2.8 standard deviations on DXY. Those are huge moves.