Hawkish Fed shift under Chair Warsh
The guest argued that the Fed under new Chair Kevin Warsh is adopting a structurally more hawkish reaction function focused strictly on price stability, tightening financial conditions even without active rate hikes.
The argument
The guest noted that the market has responded by pricing in rate hikes, shifting the Treasury curve upward. However, the guest's base case is that the Fed will hold rates steady rather than hike, as falling energy prices and potential equity market corrections provide disinflationary tailwinds.
The thesis, stress-tested
✓ What validates it
- ✓SOFR futures pricing in additional rate hikes
- ✓Core PCE or CPI prints remaining stubbornly above the 2% target
▸ Risks discussed
- ▸Rapidly falling energy prices could pull inflation down naturally, making hikes unnecessary
- ▸A significant equity market correction could deter the Fed from further tightening
Hear it yourself
"Our hosts, guests, and the BlockWorks team may hold positions in the company's funds or projects discussed. As always, investments in blockchain technology involve risk, terms, and conditions apply. Do your own research. Alright, everybody. Welcome back to another episode of Ford guidance, and we are recording on a very special day today, June 17, right after the first FOMC meeting from the new chair, Kevin Warsh. No one I'd rather be with right now than Joseph Wang, Fed Guy. Joseph, you're you're the man of the hour for this type of stuff. Great to have you on the show. Thanks for inviting me, man."
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