Warsh Revives Fed Credibility Doubts After Holding Rates at 3.75%-4.00%
Updated
Updated · Reuters · Oct 29
Warsh Revives Fed Credibility Doubts After Holding Rates at 3.75%-4.00%
3 articles · Updated · Reuters · Oct 29
Summary
Wednesday’s hold at 3.75%-4.00% reignited investor doubts after Kevin Warsh failed to clearly explain why the Fed paused despite calling the economy “strong” and inflation “too high.”
Warsh pointed only to somewhat tighter financial conditions, said they were not clearly tight, denied politics drove the decision, and signaled a December hike is likely.
Bond markets showed the confidence gap: the 2s/10s Treasury curve steepened by more than 6 basis points, its biggest one-day move since July 29, while the 10-year inflation breakeven rose to 2.38%, a six-week high.
The stumble undercut confidence Warsh had partly rebuilt after Jackson Hole and the Fed’s September hike, and it also highlighted internal strains after rare hawkish dissents from both a governor and a regional Fed president.