There were no surprises and it was silly to expect them.
FOMC Statement
FOMC Press Statement: The Federal Open Market Committee approved the following statement for release by a 12 – 0 vote:
The Committee decided to raise the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent, in support of the Federal Reserve’s dual mandate. The Committee is continuing its policy of maintaining ample reserves in the banking system.
Economic activity is expanding at a solid pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.
Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal. The Committee will deliver price stability.
After the July FOMC announcement I made this call
Unless we see some very good inflation data in the next 48 days the Fed is going to hike rates.
There is no August meeting.
I expect a hike unless there is a labor market collapse.
At the Press conference Warsh tried to explain how a pause was a hike. Bond yields surged and I commented The Market Tells Fed Chairman Kevin Warsh “You Blew It Already”
Earlier today, I commented Fed Chairman Tries to Explain Why an Interest Rate Pause Isn’t a Pause
Disingenuous Warsh
I did not expect the Fed to hike today.
But we didn’t expect nonsensical statements as to why a pause isn’t a pause either.
I am pleased to report we have an unfiltered message in real time.
In case you missed the message, here it is. “Dear Fed you blew it already.”
I was surprised by the number of people on this blog and on X who thought the Fed would hold.
This hike has been a base case given for nearly a month.
Live Broadcast of Press Conference
Here is the Live Broadcast of the Press Conference.
Alternatively watch on Youtube below.
Press Conference Statements
Warsh “The plain fact is inflation is too high and has been for too long.”
On conversations with Trump: “Independence is a two-way street.”
What’s Driving Yields
- Strengthening Economy
- Competition for capital – AI
- Geopolitics and Oil Crack Spreads
The SPX peak valuation on 13-14 Aug 2026 extending to the fractally predicted Oct 2026 initial nadir is still tracking the same x/2-2.5x/2-2.5x/1.5-1.6 x daily 4-phase fractal progression of the SPX peak valuation on 3 Sept 1929 to its initial nadir on 13 November 1929. The ten year note minus Fed funds yield, inverting negatively and lasting more than one month has accurately predicted recessions since 1970. The current antecedent negative inversion lasted longer than ever before, coincidently with the value of trailing ten year notes nominally losing value over the purchase price … for 25 months, the 1st time in 230 years. Only one other period had a single month of negative trailing valuation.
This time in the ever greater US service sector economy, the coming recession will be different, having been compounded by Iran-war-related energy , helium, fertilizers, et al critical shortages coupled with a Super El Nino creating dry weather in the most world’s populous areas. This recession will be different. US global hegemonic power will, likely, be sharply eroded by the loss of the US petro dollar.
DJT: the Economy is so awesome – – because of ME – – that we can raise interest rates.
Trump: You too, Kevin ?
Real test of FOMC’s will is coming in late October. If mid-term voting polling show at that time that Republicans are going to lose both House and Senate then FOMC’s hands are untied.
Will Middle Eastern bakshish monarchies keep selling US bonds just as Bank of Japan?
Will US inflation go higher?
Will Japan or UK puke in October ?
Will Ukraine and Russia sign energy war truce by then?
I don’t expect positive news from Middle East.
10 year over 5% now.
A hat-tip to the Legendary Keynes and his quote may be due here:
“The famous quote “When the facts change, I change my mind. What do you do, sir?”
OK, I concede I lacked “the vision thing” on this.
It wasn’t earth-shaking, but not total spineless capitulation either. Trump has his standard scapegoat teed up.
Raising rates into a commodity driven inflation is absolutely futile and stupid. These are smart men supposedly but they either have it so, so wrong as to be laughable or their goal is to push the country fast as possible to a crisis that will provide cover for what really needs to be done – devalue the $ by at least 30%, get off the $ as global settlement currency.
Another good candidate for the Khan Academy free lessons in Economics
I agree “Raising rates into a commodity driven inflation is absolutely futile and stupid”. However, I do not believe you are giving enough consideration to the demand for money right now. There is some plus minus a trillion for AI build out, another 2 trillion for federal government and who knows how much for state and local government all on top of traditional private sector demand. Demand for money is high and therefore the price is up. 2 year government debt was priced a full % above the fed target rate before the hike. Another reason rates are rising is the faith backing the dollar is collapsing and bond vigilantes are demanding compensation for eroding dollar purchasing power, current and future. Fixing rates lower at this juncture would trash the dollar more motivating market participants to demand even more compensation in the form of higher interest rates or they would not participate. I suggest the fed is following the market and realized to enforce a rate cut against the powerful market forces would have required huge QE to purchase ever increasing federal debt and would be futile. Cutting rates would be reinforcing a downward spiral at this point.
Bottom line, gimmicks like Bessent’s treasury twist and the fed cannot fix this problem, congress must cut spending below revenue. It will be painful no doubt.
You are ignoring the fact that the commodity-driven inflation has been provoked by a war that shows no signs of ending anytime soon. We are about to find out how much inflation can be caused by the spiraling price of diesel fuel.
Good points. Actually, I believe the commodity “inflation” is mostly price increases due to the war and not so much actual inflation. Prices can rise and fall on supply and demand forces totally independent of inflation or deflation.
Didn’t you hear? Donnie says the war will end “immediately” after the midterms. So we’ve got that going for us, which is nice.
Well thanks to your insight, I made good money on this on Kalshi, although I hate laying down bets (ahem, trades) on 80% likely outcomes. Made me sweat bc I had to place a fairly large bet to make a worthwhile return. Looking forward to doing it again next month, think I will bet on a hold unless things change between now and October, although the logic of not hiking then right before an election makes sense. Of course, a lot can change between now and then so I will be more cautious on that one.
Judging by the market reaction, many were expecting the fed to hold.
There is no doubt a trumpletantrum in progress as we speak… Natalie’s dodging diapers.
Or… the bond market was expecting 1/2% rise.
Pussies.
An attempted (power) grab at the lot of them, but alas, no hold.
That’s because they are suckers & losers still hoping Trump will save them. Reality just slapped them in the face. But all of this is academic. Inflation we have now is playtime inflation.
The real sh!t show starts in 2030 when all the boomers are on SS and medicare. We’re already at $2 trillion+ in leeches and we have 4 more years to go for more leeches to pile on.
In 4 years, everyone will look back fondly at the tame inflation we have today. Of course if Trumprael starts WWIII then all bets are off but in that scenario it won’t matter anyway.
Do worry, Trump, Walrus, GOP, and democrats will find a way to make things even worse.™
The privileged and blinded idiocy in thinking that the boomers, which includes Mish, and who developed the very society you enjoy and all the luxuries therein, are leaches…. is telling.
Yes, boomers are largely responsible for this mess: endless wars predicated on religious nonsense, stupid policies based on the same nonsense. Endless greed for things, selfish, self-absorbed, and on. Just ask AI what people think of boomers.
Mother nature and the grim reaper will put out this wild fire in due time. Don’t keep the grim reaper waiting.
Debt began to explode in early 2020 and continues to explode. Lots of people in congress are GenXers, Millenials, and GenZwes. The median age of the members of the House of Representatives is 58 (according to DuckDuckGo AI) Speaker of the House Mike Johnson is 54. Vice President Vance is 41. $24 trillion of the $40 trillion in debt was added in the last six years. That required younger people to get it done and they are not fiscal conservatives. They voted for this crap and are still voting for it.
Sometimes a scratched record is preferable to a mangled 8-track tape.
Not to worry as Congress is right on it! The House Budget Committee begins Field Hearing on this Monday morning in my far city (Dallas).
Oh this time they are dead serious about it.They booked a TOP Classic venue. (Not their $!) And that’s important when it is mostly by video conference. NOT!
Rest assured this time they’re serious! The Hearing is literally about having Hearings! Go back to sleeping. More BS re:BS
Although I tried and Submitted Buffett’s 3% limit (in a way that didn’t require Constitutional changes. And 2.other Top AI suggestions. All in their required form.
The Committee “acknowledged receipt”
Which means they tossed iit and all serious proposals. Change would hurt too much.
“lots of people in congress are genZ”
Can you name some of them for me? How about a list of them?
Considering that the oldest Gen Z would be about 20, the correct answer is zero
I expected the fed to fold, the ted to fold.
I suppose this is the closest thing.
What are the odds of another by the end of the year?
75%
until next year.
How do you spell P-O-L-I-C-Y E-R-R-O-R?
Wait for it…
The policy error was made long ago, The Fed could not have cut rates
It’s OK to say you were adamant – even the last few days – that no hike would (not should) occur. And you were wrong.
We’re all wrong sometimes. But why should people listen to your opinion if you can’t admit your own errors?
I was saying that a hike now can only do more damage and will not solve the price inflation problem. Not a prediction.