Fed Expected to Hold Rates, But Warsh Could Shock the Street

Summary

The Fed is widely expected to hold rates at its meeting under new Chair Kevin Warsh, but markets assign a 35% chance of a surprise hike. Michael McKee discusses the historical tendency of new Fed chairs to raise rates early, the lack of economic projections, and the uncertainty around the press conference, where the focus will be on Warsh's communication style and the reaction to the latest oil price increase.

• Consensus expects the Fed to keep rates unchanged, though a 35% tail risk of a hike remains.
• New Fed Chair Kevin Warsh's stance and communication will dominate the meeting and press conference.
• Historically, new Fed chairs often raise rates shortly after taking office, adding to the risk.
• No economic forecasts or dot plot will be released today, increasing focus on the statement and Q&A.
• Key questions include the possibility of dissents and Warsh's explanation of the inflation framework.
• Rising oil prices this morning add complexity to the case for holding rates.