Bloomberg Surveillance: The Fed Decides 7/29/2026

Summary

The Fed held rates unchanged with a 9-3 vote, as three regional presidents dissented in favor of a hike. Chair Warsh held a lengthy press conference emphasizing no forward guidance, a firm 2% inflation target, and a desire to let markets price in real-time data. The market reaction was a sharp bear steepening: front-end yields fell while the long-end surged, with 30-year yields breaking above 5.2%. Traders interpreted the lack of action as dovish and questioned the Fed's credibility to combat inflation. Guests highlighted the upward pressure on bond yields from global AI-related capex and sovereign borrowing, while offering views on the energy sector's long-term potential.

• FOMC leaves benchmark rate at 3.5-3.75%, three regional presidents dissent in favor of a hike.
• Chair Warsh refuses to give forward guidance, says markets should 'play the ball, not the referee'.
• Long-end Treasury yields spike sharply, 30-year rises above 5.2%, steepening the yield curve.
• Market participants view the Fed as insufficiently hawkish, questioning its inflation-fighting credibility.
• Bob Michele (J.P. Morgan) says 10-year yields could reach 4-6% as capital competition and deficits drive rates higher.
• Jim Bianco notes 30-year yields have climbed 110bp during the cutting cycle and sees further upside.
• Victoria Fernandez flags energy as the best sector year-to-date and a great long-term hold despite geopolitical caution.
• Discussion of AI capex and sovereign borrowing intensifies competition for global capital, adding to rate pressure.