Fed Keeps Rates Steady, Warsh Vows to Deliver Price Stability

Summary

The Federal Reserve kept rates unchanged at 3.50-3.75% in a 9-3 vote, with three hawkish dissents. Chair Kevin Warsh's press conference avoided forward guidance and stressed letting markets react to data, sparking a sharp yield curve steepening as 30-year yields surged above 5.20%. Markets questioned the Fed's inflation credibility, while guests debated implications for bonds, equities, energy, and AI-related capex.

• Fed holds rates steady with three dissents (Hammock, Kashkari, Logan) favoring a hike
• Chair Warsh refuses to give a reaction function; says markets should play the ball, not the referee
• 30-year Treasury yield breaks above 5.20% while 2-year yields fall, steepening the curve dramatically
• Market interprets lack of rate action as dovish, challenging the Fed's commitment to price stability
• Jim Bianco argues a rate hike could actually mark the peak in long-end yields by restoring credibility
• Victoria Fernandez calls energy the best-performing sector, recommending it as a long-term portfolio hold
• Concern grows that AI capex and global government borrowing are increasing competition for capital, lifting yields