Unlike Warsh’s July disaster, he was prepared for press questions today.
The median expectation for 2026 in June was 3.8 percent.
The Summary of Economic Projections shows the median forecast is now 4.1 percent for 2026 and 2027.
Warsh does not believe in forward guidance and did not vote.
PCE Inflation Forecast
The Inflation forecast explains the change in the monetary policy forecast.
Prepared Speech Comments
- “An attitude of optimism is what I heard inside the FOMC these past few days. Unemployment claims are a at a level consistent with full employment. The labor side of the Congressional mandate is in good shape.”
- “Yet, for more than 5 years, Inflation has been running above target. So our predominate focus is on the price stability side of our mandate.”
- “The plain fact is inflation is too high, and has been for too long. Too many categories are still posting increases above three percent posting on both a 6-month and 12-month basis.”
An Excellent Press Conference
Here’s a video link to the prepared comments and the following Fed Press Conference.
Unlike his big gaffe in July when Warsh stated the market was doing Fed hikes, he made no serious blunders in September.
Asked several times about Trump, the only comment Warsh made was “Independence is a two-way street.” That was perfect.
What’s Driving Treasury Yields
- Strengthening Economy
- Competition for capital – AI
- Geopolitics and Oil Crack Spreads
When asked why treasury yields are up since June, Warsh stated a strengthening economy, competition for capital, and geopolitics including the war in Iran.
Warsh fell into no traps, and he avoided any semblance of forward guidance.
Amusing Sarcasm
As noted earlier today, The Fed Hikes Base Interest Rate a Quarter Point 12-0 Decision
There were no surprises and it was silly to expect them.
Quarter point FFR increase does nothing to restrain inflation. It was meant to signal hedge fund investors to close their risky margins. S&P margin debt is at historic inflation adjusted highs. Likely, arbitrage debt on Treasuries are the same.
The amount of maturing Bonds, on the Fed’s balance sheet, will dry up by the end of October. The Fed has used principal and accrued interest on their matured Notes to repurchase long Treasuries and keep rates down (stealth QE). Without this liquidity twist, the free market will set long rates. Unless the Fed takes on additional debt through new QE.
When long rates rise, it will be temptation for margin pigs to arbitrage the long Bond. This would suppress rates and keep inflation elevated, unless the Fed moves quickly to raise FFR. Arbitrage investors once supplemented the Fed’s QE when the Fed wanted lower rates. They are now the Fed’s problem, in order to increase rates and subdue inflation.
Gold had a full several hour hiccup on this rate hike. Easiest overnight long trade ever.I don’t think the market is concerned about where rates are now. I think the market is happier to think it knows where they will be in a year than it is concerned with where rates are now. That was the long justification for the gold trade, for me.
This is supply side inflation.
Not demand side inflation.
It is wrong to raise interest rate.
It will result in STAGFLATION.
The real answer is Trump has to stop Iran war.
And there needs to be fiscal reforms to lower the deficit and debt to GDP ratio. This may mean small tax increases that expire in 4 years while holding budget annual increases just below the rate of annual inflation. Medicare and Medicaid need to be streamlined some.
What’s your prognosis for bond holders in this environment?
The stats of 4.1% unemployment rate and estimated 5.1% real GDP growth rate for 2026:Q3 (and the “blistering hot retail sales” Mish just posted about) would certainly point to your “Not demand side inflation” statement as being pure opinion.
A quarter point is pathetic. The dot plot is pathetic. If this is Warsh, the supposed hawk, we’re fucked. Socialism is inevitable now because the fed and treasury have zero principles nor responsibility.
“Excellent press conference” sure Mish. Whatever. I thought you were better than this.
keep socialism away from my social security and medicare and “public” schools. obviously sarcasm for the pittsburgh steeler fans
Holmes, we have had socialism for a long time now.
Socialism for the rich.
Regardless of the message I gotta ask; Where on earth did he get that hairpiece?
Yikes!
Warsh reminds me of a greasy schoolteacher that fell behind and couldn’t catch up.
And, I think it should have been 1/2 point because of the coming massive gasoline and diesel price increases that have happened and are on the horizon.
Agree on both the hair piece and the 0.5 raise. But really I don’t care about the hair piece.
Though it does scream his persona and ideology from little I know about him. Tradtional, conservative, right wing, Republican, law school, banker, jewish…. Really in that context the hair piece should not be a surprise! 😆
(NOTE; none of those descriptors above are meant to be negative or derogatory. I believe they are all accurate. Not all mesh with my idealogy/politics, but I haven’t seen him do much I disagree with. Maybe I haven’t looked hard enough, or maybe I align with him in economincs!)
meanwhile: How Trump’s war on EVs derailed America’s auto-factory revival Explained
https://economictimes.indiatimes.com/news/international/business/how-trumps-war-on-evs-derailed-americas-auto-factory-revival-explained/articleshow/134282465.cms?from=mdr
Well, we shall see. The proof would be the 5yr and 10yr yields at the end of the week or better yet, a full week after the rate hike.
Meanwhile, back in the Middle East:
U.S. soldier says we’re “standing there with our eyes closed getting punched in the face.”” after photos of damage caused by Iran emerge
Considering the lack of competent leadership in the Department of War under Hegseth? It’s a miracle we haven’t sunk one of our own aircraft carriers.
Give it time. They’re just warming up.
We fully deserve to be punched in the face and worse.
Repeatedly.
Strengthening economy? Outside the fraudlent AI reporting, what part of it is “strong”. Holding on for dear life might be a better term. And the the huge increase in govt debt is as much if not a bigger problem than AI debt.
I know a lot of people on this site like to believe the world is always falling, or everything is fake. But Warsh said that because…
The unemployment rate is at 4.1% – a historically very low rate; and
Real GDP growth for 2026:Q3 is estimated at 5.1%! from GDPNow.
These are “strong” economic indicators and started with Biden and continues now thru Trump. It could be the Congressional spending deficits (although we’ve always had them), the high AI spending (but it’s still currently real spending), the increasing stock market and housing wealth (Boomers are retiring in mass), or a combo of all three/other factors.
But it is strong currently.
And a 1/4 point hike is not much, but it’s not good for most to have a hard recession. If increasing interest rates a little at a time slow the stock market, make AI companies spend more on construction, and increase interest expense to put pressure on Congress, the economy will slow down to a ‘normal’ growth.
That’s the Fed plan. Don’t like it? That’s OK, but the economy is still currently plugging on.
GDP Now does not work as an indicator of economic strength. Only the final number does that. The average US GDP growth in the first half of 2026 was 1.8%. Using points in time from GDP Now, who knows, but you probably could calculate an average 3.5 % plus for the first half of 2026.
Yes, GDP and GDPNow estimates are “indicators”. Fed interest rate policies work on a time lag (estimated at 6-24 months).
So the Fed looks at past GDP, unemployment and other figures, estimates for them currently, projects what they may be in a year or more; and THEN decides from that forecasted projection what they should do with interest rates NOW.
One’s mileage may vary in this k-shaped economy but in general….
Anecdotally I agree with you–i hear lots of complaining but I see far less real pain than the incessant complaining as they have enough money to pay for the inflated gas/groceries AND are willing to drive all over to participate in life in general AND are at every retail outlet, golf course, state fair–overpaying for lots of stuff, willingly. They may not like it but you can’t tell by their continuance to be vibrant within this alleged poor economy. I see multifamily housing being built, single family housing being built, I know of no friends that are so desperate to find a job and fallen on hard times that they are concerned about bankruptcy or forced sales or how they’ll eat tomorrow. Restaurants busy, grocery and home improvement stores full. May be unhappy with prices but behaviors haven’t changed. If you’re over 45 you’ve seen 2008/9 as an adult, you saw covid. You know REAL recession. This economy may be deficit-financed and a wealth-effect house-of-cards fragile but the house of cards is 10x over these last 17 years. TEN X! The bond vigilantes may extract their share finally and more properly price credit. But until the labor market rolls over hard it’s plowing onward. I know friends who have profited more from capital assets or simply owning a home than earned wages working by a wide wide margin and have never been wealthier–and still complain. We’ve created a culture that if markets don’t return 15% then we’re allegedly in recession or have to do something (more debt, stimulus, bailouts, protect asset wealth). If and when the stock and job markets ACTUALLY fall we have a population that, having bitched that prices are up, earned real income less so, housing tight or unaffordable (legitimately) or that orangeanBad/Israeli-bootlicker/dictator is destroying us(less legitmately), will be so stunned and ill-equipped to deal with an ACTUAL downturn it’ll really sting. They’ll learn the difference between actual pain and 1st-world complaining right quick.
I often think complaining is a deep cope for being outsized-enriched over these last 17 years. Complaining assuages some guilt for knowing it may be (IS) wrong to be enriched so handsomely from passive gains in stock and real estate vs earned income wages, especially HOW it has been enabled every level via debt.
If, however, the complaing is from folks on the down and to the right portion of the K shaped economy, and you truly haven’t benefited from the financial repression, by all means complain away as it’s very real.
But until in aggregate there is an actual, palpable, visible, large slowdown due to high prices, AI, labor cuts, etc, this ship defies gravity and the trees continue growing to the sky.
This is what low rates and debt-financing looks like. K-shaped. Most on this comment section, as readers of a long-standing financial blog, are on the up-and-to-the-right leg of the K.
A comeuppance/correction/bear market is long, long overdue. Then actual-pain-based complaining will be warranted.
And right on cue, the economy-is-terrible numbers come out and inflation banging, consumers not stopping, markets rising 1.5% …again. Cut off the deficit funding, raise rates to where it actually makes a difference on inflation and inflict some really painful days to the gentified monied class and I’ll believe real progess on sanity will return. Until then, lather rinse repeat the gilding of the road to K-ville.
Be careful what you wish for, if you do really care about the lower rung of the K people.
Interest rate rises will slow the wealth accumulation of the top tier temporarily, but the pain will come down on the real people that lose their jobs, their families, and their local neighbors – not the well-do-do.
A component of GDP is government spending. Using $30 trillion as approximate GDP and government deficit of approximately $2 trillion, roughly 6.66% of GDP is all borrowed money. There is no GDP growth.
We get it; you hate government deficits (maybe you should start a riot here and recommend we lower Social Security payments to fix it).
I borrow for my house, car and previous education. A lot of people do the same (just like the government). But goods and services ACTUALLY get produced, whether we pay by cash or loan.
GDP = Gross Domestic Production
We are producing more right now than in the past; that’s growth. Your statement is nonsensical.
Zackly. I can take any wino off the street and make him look like a financial wizard, as long as he can continue to borrow and refinance.
If Trump had just succeeded in firing the Black lady, the country could have been saved.
I assume you are trying to make fun of Trump. If so, these kind of jokes only worked in the 1950s.
If his mind is stuck in the 1950s, he made the perfect joke.
I agree. Well done, especially as compared to past fed pressers.
Imo.
I dont know do they need to. Maybe you cant lower it later if they dont raise it now. Seems trump is gonna ride this war out at least to the midterms. Then if the dems win he has someone to blame the Loss on he can cut run. If the republicans somehow ( cheat ) manage to hold on the war will keep on until who knows.
When i was a kid my older siblings would beat on me. My sister would grab my short neck hairs while my older brother would twist my arm etc. while hitting me. I found it hurts less to just take it than to squirm against the pulled hair and twisted arm. Trumps in the same boat. Anything he does will make the pain worse. At some point something will change he will claim victory.
The pipeline attack led to the Saudis have to cut shipments to Europe. Last i heard the sr is running out. Ukraine not gonna stop hitting Russian refineries. (I dont blame them). Oh yeah mt oil is about to be the new tp. five qt of castrol at wm is up 6 bucks.
Seems were getting to the point where things are gonna get ugly. Asias exports gonna shut down. Food gonna start to go through the roof. Etc etc.
most nations have pretty much trying to stay out of it. But at some point when the economy collapses people can buy food. Any country with a military will has to start funneling oil to their military and choose a side. Some good ole end of days four horseman etc etc.
thats where were slowly heading. Even if peace tomorrow. Its gonna be a long time before things get rolling again. I mean at some pt the oil co s got to put the oil back in the sr. That will keep gas high long after infrastructure gets fixed.
Im no prepper but i went ahead and purchased enough motor oil for another change on the vehicles. Order a clutch for my truck 6 mos ahead of when i need so i have the parts. Told the wife we should go ahead and get xmas stuff. At some point we will be seeing cartoons of trump as the grinch. You either are not gonna find what you want or it will be twice the price.
“Ukraine” cannot do anything without US intel, weapons, and targeting.
Warsh should reform the Fed as he said he would. Liquidate all non-treasury assets and mark all assets to market. Take the losses if needed and let the demand and supply dictate prices rather than some shadow market that is now $45T.
Many of the non-treasury assets are subject to mark-to-market, but what kind of stress will that mark to market create when the first sale happens?. This is why they are still on the balance sheet, they are toxic sludge.
They never should have been on the sheet to begin with. It’s not the Fed’s job to bail out people’s bad bets.
Uh, MtM for all? Don’t look too close at Bank of America. They love HtM.
In your summary you have a quote by Warsh to the effect that inflation is running higher than the 3% baseline (3rd bullet of quotes). I thought the baseline target was 2%. If so, isn’t this a pivot? It suggests that the 10 year should indeed be 5% ish given that it represents a good proxy for GDP growth and inflation consisting of 2% GDP and 3% (give or take) inflation. In fact, one could say that a 10-year above 5% represents normality. Am I missing something here?
looks fine to me
Warsh is complaining of too many items at 3 percent when he wants 2
Trump picked Warsh because he was “central casting”.
Seems that last tweet wasn’t as sarcastic as the poster probably thought. I can’t wait to see what new idea Trump has squeezed out on the porcelain throne today. Total trading ban with the world? Mandatory bond buying? Free money for everyone- oh wait he did that. I’m starting to run out of dumb ideas that don’t seem to actually be on the mad king’s agenda.
He probably meant Our Country is BOMBING.
Our country will ride the bomb down like the whooping cowboy guy in Dr. Strangelove.
Kilgore was a loyal man faithful to his duties, if a bit dull. Not nearly as bad as Don the con.
I think he said he would bring in the military.
Don’t worry, he will never run out of dumb ideas that you can’t think up yourself.
“Give Us Another Chance!”
https://www.mediaite.com/media/news/jd-vance-asks-americans-to-give-us-another-chance-in-candid-podcast-moment/
Wow. That is. Pathetic.
To be fair to ol’ JD, I can’t think of any better message for the GOP than “whoops” for these elections. There’s not a single high point to be found, not a single issue voters are warm on (and that includes immigration). “Sorry” is genuinely the only word appropriate for an administration this inept. I didn’t expect much from a second Trump presidency, but this is beyond my wildest dreams in terms of self-defeating.
Well, he could come out an say the Iran War has been a clusterf*ck of epic proportions and that we need to cut off the genocidal ethnosupremacist state of Israel, but that would require honesty and courage he doesn’t have.
Oddly, I think after the midterms and in 2027/28 he can position himself as the centrist candidate. The Democrats will still be lost at sea and promoting policies that can be called out as anti-American citizen. Immigration is going to still be an issue. Many on the right are still angry at immigrants and want most of them deported.
“Mr. Vance, you were VP during the past four years during which inflation was high and the public debt grew at a pace never seen before. Why didn’t you do anything to prevent this?”
Pay back is a bitch
Well, didn’t he waffle on Iran behind closed doors, before he bent the knee publicly to Trump? Didn’t he declare some sort of big spirituality in a self-promoting book released during that time? Really saintly.
Yes, but that is not going to win congress or the senate, you never give incompetent people a second chance because they will just screw up again maybe worse. Although that does not seem possible.
Putative Emperor Vance has no pants.
But give him a fat chance.
or summarize as: “give us another couple years” … “you like what we did and we’ll do more.” And, “don’t give the radicals power”.