Fed vs. Inflation
Ok, so the Fed hiked rates by 25 bps yesterday. That was anticipated by the market, so there was no real surprise there. Warsh sent a clear signal that he sees inflation as still elevated and wants to push back against it. At the same time, he wanted to make sure the Fed remains perceived as independent and not tied to Trump’s wishes.
It is an open secret that the US President has been pushing for lower rates since he came into office.
In my view, though, it’s not very likely that this is the start of a big wave of higher interest rates, simply because the level of debt makes that extremely difficult. What do you think?