What Every Retail Investor Needs To Know Before FOMC
Asymmetrical Bets
· Asymmetrical Bets
· July 29, 2026 at 16:21
· ⏱ 10 min read
| Read on Substack ↗
Summary
The capex-driven tech rally has deteriorated due to rising oil, persistent rates, credit spread widening, and Chinese AI competition, making the FOMC decision critical. The Fed under Warsh is rebuilding its framework with five task forces, balancing inflationary AI buildout against potential deflationary productivity later. Markets should watch for CPI, oil prices, hyperscaler capex commentary, and the September FOMC for the next directional catalyst.
•The article cites a 40% task completion time reduction and 18% quality improvement from AI in a QJE study, illustrating the deflationary productivity potential.
•Data centers currently draw ~3% of U.S. electricity, projected to reach 8-12% by 2030, creating cost pressure that spills into the broader economy.
•Core goods prices are running at 5% annualized in 2026, reversing a two-decade trend of deflation, driven by AI hardware demand.
•Warsh has created five task forces covering communications, balance sheet, data/methodology, productivity/AI, and inflation frameworks, with findings due by year-end.
•The median FOMC participant projects rates at 3.8% by year-end (one 25bp hike from current 3.75%), but the committee is split with some seeing rates near 3% and others near 4%.
•CPI at 3.7% needs to fall below 3% and trend toward 2.5% before cuts are possible; Cook flagged 4% as a level that would trigger a 2-3% market drop and a hike base case.