Fed Raises Rates as Warsh Bucks Trump to Contain Inflation: Fed Special

Summary

The Federal Reserve raised rates 25 basis points for the first time since 2023 in a hawkish move, with Chair Kevin Warsh stressing price stability and the dot plot implying further hikes. Markets repriced sharply: front-end Treasury yields jumped, the curve flattened, the dollar surged and equities fell about 1%. Guests debated the outlook: Neil Dutta expects more hikes, a slowing consumer and a poor equity setup; Stephanie Roth sees inflation cooling and fewer hikes than priced; Jeff Rosenberg argues the AI capex cycle is not rate sensitive. Other topics included bank-stock weakness, global tightening and a weak yen, and the White House's negative reaction to the hike.

• Fed hikes 25bp for the first time since 2023; Warsh runs a hawkish, tightly controlled news conference; the dot plot implies more hikes and markets price roughly three.
• Front-end yields jump to cycle highs (2-year around 4.72%), the curve flattens, the 30-year real yield sets a record, and the dollar rallies sharply.
• Equities close down about 1%, with banks among the weakest groups after the hawkish repricing.
• Stephanie Roth: tariffs, chip and memory shortages and the oil shock are rolling off, so inflation prints should soften and the Fed will hike less than priced.
• Neil Dutta: hikes are more likely than not, the consumer is slowing, and the setup for equities is poor; he doubts the Fed's above-trend growth forecasts.
• Jeff Rosenberg: AI capital investment is driven by availability, not cost, of capital and will not be derailed by 25-75bp of hikes.
• Global and political backdrop: ECB tightening, a weak yen and pressure on the Bank of Japan, plus White House criticism of the hike ahead of the midterms.