Publications

By reiterating that “it will be appropriate to maintain the reference rate at its current level” and that the current stance is “well-suited” to the macroeconomic environment, the Board signaled that it is comfortable with the policy rate at its current level.

Recent inflation data support what most Board members signaled earlier this year—that a neutral stance is enough to bring disinflation across the finish line.

The Fed is set to keep the fed funds rate target range unchanged at 3.50-3.75% this week. Chair Warsh will likely reinforce the FOMC’s hawkish lean by pointing to the AI investment boom as a potential source of demand-driven inflation.

The renewed escalation in Iran has pushed Treasury yields back to early-2025 levels, as markets again weigh the impact of higher oil prices on both the inflation and the economic growth outlook.

Banco de la República raised its policy rate by 75 basis points to 12.0%. The decision was split, with four Board members voting in favor of the increase, two supporting a 50-basis-point rate cut, and one voting to keep the policy rate unchanged

Central banks should not become climate activists. They should treat climate change and mitigation policies as macroeconomic drivers which can affect inflation, output, financial conditions, monetary transmission and, most importantly, inflation expectations.

While policy rate expectations have risen, lower inflation expectations and term premia cap long-term yields. Warsh’s focus on price stability alongside a massive hawkish shift in the dot plot put concerns over the Fed’s independence to rest, unwinding the debasement trade.