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Fed Raises Rates Again; Warsh Signals More Hikes Ahead

1 hour ago

The Federal Reserve lifted interest rates Wednesday as Chairman Kevin Warsh warned inflation remains the priority. Analysts see more hikes coming.

The Federal Reserve raised interest rates on Wednesday, a move markets had widely anticipated, and new Chairman Kevin Warsh used a brief news conference to underline the central bank's firm focus on bringing inflation down.

Warsh kept his remarks short and pointed, telling reporters that policymakers remain committed to the fight against rising prices. Several analysts read his tone as hawkish, and some warned the tightening cycle is far from over.

Mike Madowitz, principal economist at the liberal Roosevelt Institute, said the decision was probably not the last increase. He pointed to unemployment sitting near 4% and a core PCE inflation forecast of 3.5%, arguing those numbers leave the Fed little choice but to keep prices at the centre of its attention. Even so, he questioned the approach, describing monetary policy as "a really costly way to solve this problem right now."

Investors reacted poorly. Andrzej Skiba, who leads the BlueBay U.S. Fixed Income team at RBC Global Asset Management, said riskier assets sold off as expectations for a shorter run of hikes gave way to the Fed's tougher stance. He added a more optimistic note for bond holders, suggesting that Warsh's plain-spoken messaging could lend support to longer-dated Treasury prices once the initial shock settled.

Krishna Guha, head of economics and central bank strategy at Evercore ISI, praised the chairman's performance at the podium. He called the press conference clear and self-assured, and consistently hawkish without tipping into alarm. According to Guha, Warsh paired a strict warning on inflation with a brighter reading of the economy, noting that growth has been picking up since early summer.

The combination of firm rate policy and a confident view of the economy left markets weighing how many more increases lie ahead. For now, the message from the Fed's leadership is that the campaign against inflation will continue.

The decision drew attention beyond the United States, with search interest in the Dow Jones and the broader market reaction climbing among Indian investors tracking the fallout.

Federal Reserve rate hike, Kevin Warsh, FOMC decision, US inflation, core PCE, Treasury prices, interest rates, Dow Jones

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