The Fed raised rates by a quarter point, its first hike in three years, and declined to comment on what's coming next. FOMC The Fed raised rates by a quarter point, its first hike in three years. Fed Chair Kevin Warsh said the move would not immediately lower individual prices. Here is what economists and analysts say could come next. Markets and analysts are abuzz over the first Fed interest-rate hike since the second Trump administration. On Wednesday, the Federal Reserve raised rates by a quarter point, its first hike in three years, as officials sought to curb inflation. Kevin Warsh, the Federal Reserve Chair, said that the move would not immediately bring down individual prices, meaning Americans could still feel pressure at grocery stores and gas pumps. Warsh declined to say whether more hikes were coming and rejected the idea of forward guidance. Instead, he said future decisions would depend on incoming economic data, and said outside pressures do not drive decisions by the Federal Open Market Committee. Here's what smart people in economics and finance are saying about the Fed's latest rate hike, and where interest rates could go next. Justin Wolfers, professor of public policy and economics at the University of Michigan Justin Wolfers, a professor of public policy and economics at the University of Michigan, wrote in a post on X that markets would be glad that the rate hike decision means Warsh is "more of a Serious Kevin than a Sockpuppet Kevin." "Silent Kevin remains largely silent. It's up to you to guess the what, the where, the why, and the next," Wolfers said on Wednesday. "Remember, he's Silent Kevin because he wants markets to focus on the economy rather than the Fed." Bill Banfield, chief business officer at Rocket Mortgage Bill Banfield, the chief business officer at Rocket Mortgage, said in commentary that the foundation for the housing market remains "solid," though elevated rates squeeze affordability. "For anyone house hunting right now, it's a buyers' market in many metros, with inventory at a six-year high and plenty of room to negotiate," Banfield said. "That changes the dynamic for buyers, especially those who remember the ultra-competitive market in recent years," Banfield added. Heather Long, chief economist for the Navy Federal Credit Union Heather Long, chief economist for the Navy Federal Credit Union, said in a post on X on Wednesday that the "big news" is that the Fed is signaling a "mid-cycle adjustment" of "2 or 3 rate hikes." "He doesn't like to give forward guidance, but he's telegraphing it's probably going to take more than 1 hike," Long said of Warsh. "They are trying to act early and decisively to ensure they don't have to hike much to get inflation under control." Jerry Tempelman, former senior analyst at the New York Fed Jerry Tempelman, a former senior analyst at the New York Fed and vice president of economic and fixed income research at Mutual of America Capital Management, said in commentary that the "disinflation experienced earlier this summer did not continue." "After Fed Chief Kevin Warsh's speech at Jackson Hole last month, which was generally interpreted as more hawkish than anticipated," Tempelman said, "He would have been hard-pressed to explain the Fed's monetary policy stance if it had not raised short-term interest rates at this week's FOMC meeting." Jacob Robbins, assistant professor of economics at the University of Illinois at Chicago Jacob Robbins, an assistant professor of economics at the University of Illinois at Chicago and a nonresident scholar with the Washington Center for Equitable Growth, said in commentary he is pleased with the Fed's latest decision. "Through this action, they affirmed their commitment to the 2 percent inflation target, demonstrated their independence from President Trump's calls for lower rates, and reassured the public that monetary policy decisions remain grounded in economic data," Robbins said. Olu Sonola, head of US economics at Fitch Ratings Olu Sonola, head of US economics at Fitch Ratings, said in commentary that the inflation projections point to a "longer course of treatment" and that the "robust economy" gives the Fed room to raise rates further. "This unanimous decision should maintain the Fed's inflation-fighting credibility against a politically sensitive backdrop," Sonola said on Wednesday, "But the economy's ability to withstand higher rates should not be confused with consumers' ability to absorb them." "Aggregate resilience will mask a widening divide between consumers insulated from higher rates and those being squeezed by increasingly expensive credit," Sonola added. Andrew Davis, head of investment strategy at Bryn Mawr Trust Andrew Davis, the head of investment strategy at Bryn Mawr Trust and a former analyst at the Bureau of Labor Statistics, said in commentary that the latest interest-rate move reflects a Fed "less comfortable waiting for inflation to resolve itself." "Persistent inflation and renewed pressure from rising energy costs have shifted the balance enough that policymakers appear willing to tighten again," Davis said. Kay Haigh, global head and chief investment officer of fixed income and liquidity solutions at Goldman Sachs Asset Management Kay Haigh, global head and chief investment officer of fixed income and liquidity solutions at Goldman Sachs Asset Management, said in commentary that the Fed has signaled that it's not planning an aggressive series of rate hikes. "Most FOMC members see a total of two hikes this year per the SEP, and it will likely skip October's meeting given its proximity to the midterm elections," Haigh said. "One more hike this year in December is our base case, although this remains contingent on upcoming CPI reports and the path of energy prices." Oren Klachkin, financial market economist for Nationwide Oren Klachkin, a financial market economist for Nationwide, said in commentary that he expects another quarter-point hike before the end of the year because inflation is unlikely to ease significantly anytime soon. "Our baseline forecast doesn't expect inflation to cool meaningfully until well into 2027 and given percolating risks it could take a while for policymakers to hit their goal," Klachkin said. Seema Shah, chief global strategist at Principal Asset Management Seema Shah, chief global strategist at Principal Asset Management, said in commentary the Fed's unanimous vote suggests another hike may be necessary. "The unanimous vote shows that rising energy prices and stubborn inflation have brought even the doves on board, making a one-and-done move highly unlikely," Shah said. "With markets already pricing multiple increases, policymakers will probably need to deliver at least one more hike to safeguard credibility," Shah added. Read the original article on Business Insider
The Fed raised rates by a quarter point, its first hike in three years, and declined to comment on what's coming next.FOMC The Fed raised rates by a quarter point, its first hike in three years. Fed Chair Kevin Warsh said the move would not immediately lower individual prices. Here is what economists and analysts say could come next. Markets and analysts are abuzz over the first Fed interest-rate hike since the second Trump administration. On Wednesday, the Federal Reserve raised rates by a quarter point, its first hike in three years, as officials sought to curb inflation. Kevin Warsh, the Federal Reserve Chair, said that the move would not immediately bring down individual prices, meaning Americans could still feel pressure at grocery stores and gas pumps. Warsh declined to say whether more hikes were coming and rejected the idea of forward guidance. Instead, he said future decisions would depend on incoming economic data, and said outside pressures do not drive decisions by the Federal Open Market Committee. Here's what smart people in economics and finance are saying about the Fed's latest rate hike, and where interest rates could go next. Justin Wolfers, professor of public policy and economics at the University of Michigan Justin Wolfers, a professor of public policy and economics at the University of Michigan, wrote in a post on X that markets would be glad that the rate hike decision means Warsh is "more of a Serious Kevin than a Sockpuppet Kevin." "Silent Kevin remains largely silent. It's up to you to guess the what, the where, the why, and the next," Wolfers said on Wednesday. "Remember, he's Silent Kevin because he wants markets to focus on the economy rather than the Fed." Bill Banfield, chief business officer at Rocket Mortgage Bill Banfield, the chief business officer at Rocket Mortgage, said in commentary that the foundation for the housing market remains "solid," though elevated rates squeeze affordability. "For anyone house hunting right now, it's a buyers' market in many metros, with inventory at a six-year high and plenty of room to negotiate," Banfield said. "That changes the dynamic for buyers, especially those who remember the ultra-competitive market in recent years," Banfield added. Heather Long, chief economist for the Navy Federal Credit Union Heather Long, chief economist for the Navy Federal Credit Union, said in a post on X on Wednesday that the "big news" is that the Fed is signaling a "mid-cycle adjustment" of "2 or 3 rate hikes." "He doesn't like to give forward guidance, but he's telegraphing it's probably going to take more than 1 hike," Long said of Warsh. "They are trying to act early and decisively to ensure they don't have to hike much to get inflation under control." Jerry Tempelman, former senior analyst at the New York Fed Jerry Tempelman, a former senior analyst at the New York Fed and vice president of economic and fixed income research at Mutual of America Capital Management, said in commentary that the "disinflation experienced earlier this summer did not continue." "After Fed Chief Kevin Warsh's speech at Jackson Hole last month, which was generally interpreted as more hawkish than anticipated," Tempelman said, "He would have been hard-pressed to explain the Fed's monetary policy stance if it had not raised short-term interest rates at this week's FOMC meeting." Jacob Robbins, assistant professor of economics at the University of Illinois at Chicago Jacob Robbins, an assistant professor of economics at the University of Illinois at Chicago and a nonresident scholar with the Washington Center for Equitable Growth, said in commentary he is pleased with the Fed's latest decision. "Through this action, they affirmed their commitment to the 2 percent inflation target, demonstrated their independence from President Trump's calls for lower rates, and reassured the public that monetary policy decisions remain grounded in economic data," Robbins said. Olu Sonola, head of US economics at Fitch Ratings Olu Sonola, head of US economics at Fitch Ratings, said in commentary that the inflation projections point to a "longer course of treatment" and that the "robust economy" gives the Fed room to raise rates further. "This unanimous decision should maintain the Fed's inflation-fighting credibility against a politically sensitive backdrop," Sonola said on Wednesday, "But the economy's ability to withstand higher rates should not be confused with consumers' ability to absorb them." "Aggregate resilience will mask a widening divide between consumers insulated from higher rates and those being squeezed by increasingly expensive credit," Sonola added. Andrew Davis, head of investment strategy at Bryn Mawr Trust Andrew Davis, the head of investment strategy at Bryn Mawr Trust and a former analyst at the Bureau of Labor Statistics, said in commentary that the latest interest-rate move reflects a Fed "less comfortable waiting for inflation to resolve itself." "Persistent inflation and renewed pressure from rising energy costs have shifted the balance enough that policymakers appear willing to tighten again," Davis said. Kay Haigh, global head and chief investment officer of fixed income and liquidity solutions at Goldman Sachs Asset Management Kay Haigh, global head and chief investment officer of fixed income and liquidity solutions at Goldman Sachs Asset Management, said in commentary that the Fed has signaled that it's not planning an aggressive series of rate hikes. "Most FOMC members see a total of two hikes this year per the SEP, and it will likely skip October's meeting given its proximity to the midterm elections," Haigh said. "One more hike this year in December is our base case, although this remains contingent on upcoming CPI reports and the path of energy prices." Oren Klachkin, financial market economist for Nationwide Oren Klachkin, a financial market economist for Nationwide, said in commentary that he expects another quarter-point hike before the end of the year because inflation is unlikely to ease significantly anytime soon. "Our baseline forecast doesn't expect inflation to cool meaningfully until well into 2027 and given percolating risks it could take a while for policymakers to hit their goal," Klachkin said. Seema Shah, chief global strategist at Principal Asset Management Seema Shah, chief global strategist at Principal Asset Management, said in commentary the Fed's unanimous vote suggests another hike may be necessary. "The unanimous vote shows that rising energy prices and stubborn inflation have brought even the doves on board, making a one-and-done move highly unlikely," Shah said. "With markets already pricing multiple increases, policymakers will probably need to deliver at least one more hike to safeguard credibility," Shah added. Read the original article on Business Insider
