Power Lunch - Fed holds rates steady 4/29/26

Episode Date: April 29, 2026

The Federal Reserve left rates unchanged at its latest FOMC meeting. Power Lunch brings you a special Fed edition show.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Time now for the Fed rate call with Steve Leesman. The Federal Reserve keeping interest rates unchanged at 3.5 to 3.75%, but an unexpectedly dramatic meeting with an 8 to 4 decision, that is, four dissents to this decision here, three that wanted to remove the apparent easing bias in the statement, and one who wanted to reduce interest rates by a quarter point. It's the first time there have been four dissents in a Fed FMC meeting since October 1919. Let me go through it. Hamick, Logan, and Koshkari banding together supporting the decision not to change rates. They were in favor of that, but the statement says they opposed the easing bias in this statement. Now, that easing bias says the extent and timing of additional adjustments to the target range.

That has typically been something used in the statement to signal that what we did before is going to happen again. And since before it was cutting rates that was deemed as an easing bias. that gone. I talked about that, by the way, before the meeting. Myron, Governor Myron, continued his dissent in favor of a quarter point cut. He has dissented at every meeting since joining the Fed last year. The statement saying, inflation is elevated. They took out the word somewhat, but added the phrase reflecting the increase in global energy prices. So it says inflation is elevated reflecting the increase in global energy prices. Statement repeats the statement that developments in the Middle East are contributing

to a high level of uncertainty. Economic activity seen expanding at a solid pace, job gains remained low on average, and the unemployment rate little change. Little context, guys, I don't know if you remember, but in the lead-up to this meeting, I said one of the major questions is, did the Fed change the statement to go to neutral? I didn't expect that to happen, and it didn't happen, but as a result of it not happening, and all of the rumblings you have in some Fed officials that wanted to go more to neutral and say, you know what, the next move could be a hike or it could be a cut or it could be staying the same, there was at least three of them who felt strongly enough about changing the statement and going to a neutral bias in their language that they decided to dissent today.

Guys, back to you. Wow, four dissents when it's normally zero. Steve, stick around. Let's go now out of Chicago for reaction in the bond market. And Rick Santelli, I know the bond market's not moving a whole lot, but I'm sure you have a take on the four dissents. And I do wonder, did Powell lose control of the Fed at the end? or I wonder if they felt like they could dissent because it was Powell's last meeting. Either way, it's a big headline.

Yeah, they are big headlines, and it is historic. But the way I look at it, this would be like a baseball team holding a meeting about talking about, you know, world series strategy when they're in last place in September. The Fed and these votes really don't mean much. What means a lot is what you said first, is that the Treasury complex is hardly,

moving. And the moves that it did have were to the upside in yield. We briefly hit 391, almost 392 in a two year. We briefly hit 441 in a 10 year. And as you look at those charts, we're still hovering pretty close to where we were at 390 and 439 respectively. But consider this. Look at the charts going back to the end of March. Should we close here, a two year would have had the highest yield closed since the 26th of March, a 10 year since the 27th of March, and yesterday's closes were basically right about in line with those numbers. So the point here is that if you look at what's going on in the Mideast, 443 is the high yield close for 10.

We're not there yet. So conflict is definitely making the future murky, but all in all, the Fed has nothing to do here. They have to stand pat. inflation was running hot before the conflict. It's definitely either the same or a little hotter now. We don't know how much will metastasize in the economy. And as far as the dissenting votes, I will say this.

Before any easing occurred in 2024, rates were lower than they are now. They are now higher after all the Fed's easing. So what that means to me is that we can talk about dissents, we could talk about myelin, we could talk about wars and easing and all of that. But in the end, Mr. Market is going to have the ultimate say, if they lower rates and the market doesn't like it, banks will charge each other less. But everybody else will still potentially pay more, especially if housing is in the middle of your radar screen. Housing is going to keep up with a tenure. If the Fed mystically lowered rates 100 basis points,

my call is, you'd probably see close to four and three quarters in a 10 year. Four and three quarters, so 475 if they went down a full point. Rick, stay there. Let's get back to Steve Leesman for some more reaction, Steve, from, as you said, the first time in, what is it, 30 plus years? We've had four dissents. Yeah, and I want to underscore something Rick was talking about, which is a really interesting question as to the direction of the committee here. What these three dissenters essentially did was bring the outlook for rates in line with where the market is. And that really underscores what Rick was just talking about. The market doesn't have to move today because the market is already where those three dissenters

wanted to go, which is a neutral bias. And if you look ahead at the probabilities for Fed rate cuts, which don't really exist, what there are probabilities with the Fed remaining the same, and they remain, let's just talk about to the end of the year, 94% for no change by the end of the year, 60% for no chair, 63% for no change by July 2027. So what this suggests, guys, is a very interesting coming conflict between a chair who we know has interested, He thinks he wants to cut interest rates and a committee that's solidifying on the idea of making neutral policy and moving away from an easing bias. Can't wait. And one more thing, Steve.

Listen, I understand inflation's on the warm side, especially since we don't know how it's going to interact with the economy down the road or when the Middle East conflict is going to end. But I will point to today's data and a lot of data that we've had. We've had some very strong data. So part of the rise in interest rates may indeed be that the base case for the state of the economy is better than many thought. And it's only not better. And even though many surveys for sentiment look negative, what actual consumers are doing versus what they say the surveys seem completely in opposite direction. I know. Okay, okay, let's go back.

We didn't get a rate cut. Nobody expected a rate cut. Okay, Francis. But I think I want to, and if I frame this incorrectly, please correct. I'll let you know. I'm sure you will, even your nice Canadian way, which is we have three members of the Fed Board who dissented, not on rates, but dissented because they indicated they don't want to cut later. It felt like a direct shot across the bow of an incoming Kevin Warsh administration. We or no. I don't see this as dissents against Powell or a future chair. This is dissents against the soft cutting bias that has existed pressured. externally and internally it's coming through.

This is a committee that is marking to market, the view the language with where the data is. The data is telling you the labor market is extraordinarily tight. The data is telling you inflation is running near 3% and heading in the wrong direction. That's soft bias. Didn't make sense in the context of where we were or where we're going next. So this is a statement that aligns the Fed with where the data is now. It's appropriate. Well, what is really dramatic in this is that there we now have a level of disagreement that we just

haven't seen for many, many decades. This is very, very significant because we just have an incoming Fed chair that has, of course, been almost asked to lower interest rates by the president. And now we certainly have three members that are strongly saying this is not going to happen any time in the near term. So this conflict that we are now seeing on the FMC, I think that that is a very dramatic development. Because to Steve's point, the market is pricing that the first Fed cut is coming only in late

2007, but the risks are really now that there is more tailwinds coming to growth. And if there's more tailwinds coming to growth, and we already have inflation going up because of tariffs, because of immigration restrictions, because of all the prices, then that is indeed complicating the FOMC's job of figuring out what should they do at the coming meetings. David Kelly? Well, I think this is a renewed declaration of independence. I think it is a shot across the bows of Kevin Warsh, and it's really saying we're not going to have a situation where consensus is going to just follow the leader year to impose rate cuts which simply aren't justified by the data. But I think the fact that they took the trouble to dissent really tells me they want to make

it clear to the incoming chair that they really don't see a reason to cut rates right now. They want to send that message out quite clearly in case it's assumed that they will simply acquiesce. Steve? Yeah. First of all, I want to underscore that I agree with Rick that this data has been strong. And we just, we agree so, so frequently that I want to make sure people know when, when we actually do agree with them. We're a timestamp this, Steve. We got it. The data has been strong.

But you got it on tape. That's great. The other thing I want to say to Torsten is Torsten, I think this vote might have been even more in favor of dissents or even that they would have taken out the easing bias if this was not Powell's last meeting. I think Powell wanted a hand to wash the status quo and didn't want to make a big change. of where the Fed had been over the past several months just before he left. But I think that there's maybe more than three people, and I've been following this, Torson, I know you do probably better than I do. Each word that's come out, and a lot of those words have been about, we're not comfortable

with this idea, and we want to go to a more even keel here. It's not about hiking, and it's not about cutting. It's about being we could go either way here. Before Torson jumps in, Steve, can I ask you kind of a tough question, but I'd love a straight and answer as possible. Hamick, Kashkari, and Logan, are they seen as, forgive me, politically left-leaning or right-leaning? Huh. Well, Kashkari served in the first Bush administration. I don't know about Logan and Hammock. Hammock was the treasurer at Goldman Sachs. Logan was on the New York Fed Board.

I think the better way to think about them is more as hawks. I think this is, I think what you've seen here is the kind of rise of a fairly strong and outspoken in hawkish wing here. I kind of felt like Kashkari was leaning that way, and I knew Hammack and Logan were. Yeah, no, it's just, Torsen, you can jump in, but it's, we're used to for the past 20 years or so, often the Fed regional presidents would be a little bit right-leaning and a little bit hawkish, but now we're like scrambling all of all of those factors that we've previously been used to, so go ahead. Well, and we have for quite some time been used to that the next Fed move would be a cut, but what is really the drama today is that now they are telling us, well, the next Fed mood might not be a cut.

Now we should stay constant. And maybe we may have to discuss later this year to have to hike rates. So that's why this is such a dramatic decision. Jim, Karen, so your job, part of your job, you've got a big job. Part of your job is to take what we're talking about and figure out what to say to clients. So based on this, should the bond market be confused or does the bond market still have, in your mind, a strong vision of where rates need to be?

So, look, I'm smiling right now because this is probably the big. best setup situation for Kevin Warsh to come in and take over the Fed. He's got a clean slate of paper. He doesn't have to deal with a Fed that maybe had an easing bias. And now we've got some dissenters here today that's just showing that the Fed is just saying that we're neutral. So the new Fed chair gets to come in and just says, look, we have a clean sheet of paper. It's a level playing field. We can interpret the data as it comes through. I think that the bond markets have it right. I mean, yes, yields have gone up, energy prices are higher, but ultimately what this tells us is that it starts to reduce the volatility of interest rates because we're not sitting here waiting for the Fed to cut rates one or two or three times or whatever the case may be, but we also don't necessarily expect them to hike rates a lot either. So, therefore, it looks like we have a very neutral Fed now going out as far as the eye can see, and that's going to reduce a lot of interest rate volatility, and that should take down volatility in other markets.

That's fine, except that, look, I mean, just Occam's razor quote here, to some extent, Warsh is coming into lower interest rates. So it's a clean sheet of paper fine, but this is now a sheet of paper that is going to make it harder for him to lower rates. Yeah, but did he want to lower rates? I mean, I know that's the presumption in the markets that, you know, that that was his job. That's not really what he said. And he's been hawkish and he's been doveish. He hasn't been painted as a hawk or a dove in his prior, you know, in the prior years. his view is that the Fed should have a smaller footprint or imprint on the markets, have a smaller balance sheet, which is a de facto tightening, a smaller balance sheet,

which means that he can have easier interest rate policy to offset the smaller balance sheet. Those two things go hand in hand. That doesn't necessarily mean he's going to be dovish or that he came in with a predetermined notion to need to cut interest rates or even want to cut interest rates. And that's why I'm saying that this is a great start for Kevin Warsh. She doesn't have to battle this and deal with a rate-cutting bias that was left over from the Fed and then be asked, why not? We see the markets tilting more in a hawkish direction. Again, none of this matters so much until the press conference happened by hawkish.

I just mean equities are selling off a little bit. Dow's session lows down 410. Rick Santelli, you were going to jump in here. Yeah, the curve is flattening, and I think this is something we need to pay attention to because I think the long end has had its GPS. When we look at our long rates against Japan, against the UK, against the Eurozone, their comps go back decades in some instances. Ours go back months. But the short end now, if we are getting to or towards a neutral bias, truly, the market's in sync with that.

We're up like 11 basis points in a two-year, almost double the six and a half basis points were up in a 10. I would look for that dynamic to continue. I think rates are going to get closer together all along the curve. Yeah. Francis, here's what's amazing to me. For two years, we've talked about this and that and the Fed, not you and I, but the whole everything, the whole network. And yet 10-year yields are exactly where they were two years ago. The unemployment rate, one-tenth of one percent higher than it was two years ago. In two years, almost nothing. Things have changed. There's been trades. Stock market's up. But stock market is soared, but the bond market is exactly where it was in the U.S. two years ago. Why?

Well, we know the reasons for that. The economy is less interest rate sensitive or moving towards fiscal dominance. But the point of this thing... What does that mean moving toward fiscal dominance? It means government spending is taking over more of the cycle, becoming a larger driver than feds meeting each individual every six weeks. But I'm with Jim here. I'm feeling a sense of calm and recalibration because putting aside the politics, what you're mentioning is that the data has been strong, inflation has been high, the labor market has been tight, and this has been disconnected from the bias on the Federal Reserve. So this is a very aggressive shift back towards neutral. But as an economist, I'm grateful that now we have a connection between Fed neutrality and where the data actually lands. We know a good starting point. Listen, we know Steve's got to run on into the press conference. So Steve, I want to give you a final word because I know you got a boogie. How much of this press conference you think will be sort of about the data, about the news, about whatever,

and some of it is like a swan song, insert Led Zeppelin reference here, to Jerome Powell. I think there's going to be a lot of that. I think Powell is certainly prepared to tell us what he's prepared to tell us about his future at the Federal Reserve, whether or not he's going to remain as governor. I think there'll be more than a couple questions on that. But, Brian, I was just going to say that you're telling this history of the economy, like on a Seinfeld episode, where you said the Fed cut rates and yada, yada, yada,

the 10 year is the same. But a lot's gone down since then, including this massive AI investment boom. We've had pretty good economic growth. I guess the question is, where should the 10-year be? And there is an argument that maybe it ought to be quite a bit higher to take account for the growth that Rick and I were talking about. And I think you're seeing that, just to bring it back to where this discussion began, maybe you're seeing that reflected in the three dissenters and a growing sense that maybe the Fed needs to either be tighter or remove this easing bias and that it's in the right place for the growth that's here and the inflation that's here. here and coming. All right. Hard to leave it there because there still feels like a lot more to

discuss. And we will. But thanks to our panel, Francis Donald, Horson, Slocke, Jim Karen, David Kelly will see you after the break. Really appreciate everyone's time here. Dow's just off the session lows down 387 as we approach the end of an era. We're minutes away from Jerome Powell's last press conference as Fed Chair and we'll take you there live as soon as it happens right after the short break. Welcome back and we're showing shares of Pershing Square. PSUS, the fund that has gone public along with the parent company today. But it's trading down 15% from its open price. Again, this price last night raised capital at the low edge, I should say, of the intended range. And we're watching it tick by tick this afternoon to open just after 2 p.m. Eastern.

And it's currently trading Bryant around 42 a share. In meantime, the big headline for the Federal Reserve, the Fed leaving rates unchanged. Everybody and their mother and their mother's mother expected that. But what they did not expect was what Steve hit at the top, which is that there were four dissents. Stephen Meyer, and he's been descending a lot lately about wanting to cut rates. But then three others actually trying to eliminate the bias toward easing rates down the line. We swapped out our panel a bit. David Kelly, we invited you into the Chamber of Doom here.

Jeff Kilberg joining us as well of KKM Financial on set. Jeff, market's not moving. I think they're waiting for. Jerome Powell, and he didn't drop a bomb, he may still yet, but the four dissents, should the market react to this? I don't think they need to react, but what this is, to use a football analogy, this is a new quarterback hitting the portal. When you see a new quarterback coming in, and Kevin Warsh, in the old quarterback, and Jerome Powell leaving, this was the

rest of the players kind of letting him know, hey, we're not going to let you lead us here. So I remove all the politics, but I think it is nice that they recalibrated. They basically welcome with open arms, but Sully, this is a big deal because typically, as we know, we don't see this type of chatter, this type of kind of dysfunction inside the Federal Reserve. I was a little surprised by Jim, Karen, and I can say it now because it's not here, so I'll just say what I want. Hi, Jim, I'm kidding.

Which is that he thought it made the Fed's Kevin Warsh's job easier, assuming it gets confirmed. Does it? It seems to me it would make it harder because the Jeff's point. He's coming in to kind of a, kind of an angry family. Well, his first problem, I think, is the president thinks he is nominated a Fed chair who's going to cut rates because I could sort of follow Kevin Warsh's logic about, well, if you shrink the balance,

then you've got room to cut short-term rates. But that's a complicated point, which it was maybe wasn't quite so clear in the White House. But no, I think what it says is that Kevin Warsh is going to be chairman rather than chief. You know, he follows...

To be seen. Well, he follows in the footsteps of giants in terms of the... We've only had five Fed chairs since 1980. Wow. And they were all, you know, intellectual giants. I think Jay Powell was perhaps the least qualified as an economist, but an extraordinarily wise man, you know, full of empathy and integrity. And I think he really brought the committee with them.

And I think Kevin Warsh is going to have to prove himself. Now, that was always going to be the case, but this is just, I think, another message to him that, look, you're really going to have to talk with everybody in the committee. You're going to have to find consensus. You can't just steamroll of people with your own ideas here. I think this is maybe, as you said, it's just like a new quarterback coming in and getting a little bit back to. nominated chairman chairman, Chairman Powell, if we remember, 10 years ago. So there's a lot of intricacies. And I think at the end of the day, Kevin Worcester's coming in. He wants to go behind the red velvet curtain. Powell's been in front of Red Velvet Curtain. And here,

we have to remember right now, we have quiet quantitative easing. We're buying $40 billion a month. So the QQE, you can use that. So the QQE, quiet quantitative easing, his balance kit has gone up $200 billion in 2026. So Kevin Warsh, he is his hands full. So I find it a little ironic. And again, after, Jim's point. I've had different traders emailing and saying they agree with that point, this a clean sheet of paper idea, so fine. But I find it a little amusing that we all think that we all go, well, we know what war told the president, but we know what he's really like. And I wonder if we're all being a little bit too cute with that. I mean, this is a complicated

game that he's playing, but I find it unreasonable to think that he's going to simply be hawkish because he has been in the past. I also find it unreasonable to think that he's going to be dovish just because that's what he knows the president wants. But do you know what I mean? I'm saying here, David? Well, yeah. I think we need to be fair to him. And he, you know, this is a new job. It's going to be, you know, he deserves everybody's support going into this very important job. But I think you do have to ask questions about, you know, when he was on the Fed before, he definitely was hawkish. And then he's now, in sort of the lead-up to this, he's expressed almost the opposite set of views. And he just wondered, well, what are the true views,

or how deeply held are those particular views? And what Jim almost was saying, and a lot of people feel this way, a lot of people don't buy it. But the most... He was cutting rates in September of 2024. Jerome Powell cut rates in September of 2024, and I still don't know why. Well, you know, inflation was going to come down anyway,

and it did. It was transitory inflation. I think getting back to a normal level of interest rates, which is probably close to where we are right now. Transitory was a rough word. It was a rough word. But I know, and they gave him a lot of flackford, but if you actually look at a chart on inflation, it was transit. And by the way, what we're going through now is transit too. But the thing is, we don't know what transitory is on the boat's transit out of the Strait of Hormuz.

And to your point, crude oil is at 107. Yeah, and he's right. And the other thing to think about in this oil issue is we went to this on a massive stockpile of inventory around the world. We're working through that. But while we're working through that stockpile, we're not seeing the price effects. If this goes on another month, two months, three months, four months. We've got a real problem. You're talking to my world now, Dave.

I will say this. The paper market that we show on the screen and the physical market are different things. If you want to buy an actual physical barrel of oil in the Middle East right now, it's probably $150 a barrel. The U.S. is largely insulated a little bit from that. From that. Let me ask you this, Jeff Koeberg. You and your team made a great call on Intel recently. Huge gains.

Okay, big part of your ETFs, plural. Does what you heard today from the Fed or what we might hear from Powell change the way you view tech stocks, things like that? Because interest rates do affect stock markets. They do, but it seems like it's delayed now, where you talk about the other dissenters telling what's going to happen here when Kevin Warsh comes in. I look in and I focus on the moment. We have four magnificent seven names reporting after the bell. We are seeing earnings growth year over year, wild growth. This is the six consecutive quarter, solely.

We're seeing 15 percent currently of growth. So that, in conjunction with the Fed, injecting $40 billion a month, that's a tailwind. So I know we're going to sit here and slice and dice what's going on with the Fed. But I don't think they have the ability to cut any rates, no matter what the President says, with oil at 107. And I think in a way it's good that the Fed is essentially saying, don't look to us. We're not going to bail you out because the administration's got to figure out a solution to the problem in the Middle East. They've got to figure out a solution. And if they assume that somehow the Fed is going to cut rates and that's going to fix things or something else going to happen to fix things,

that's just very bad strategy. So in a way, the Fed's saying you've got to deal with the problems because we're not going to baili rash here. And it's almost a reminder that we're independent, right? Exactly. One other thing I think about, Francis Donald used the term fiscal dominance and was talking about, and we all know this is true, look at the deficits and look at the way that kind of the fiscal side is dominating the business cycle.

Is the Fed going to push back on that, David Kelly, and would a Warsh Fed push back on that? No, I think Warsh, to the extent that he has expressed a philosophy, it's really the Fed shouldn't. And I agree with that, that the Fed needs to have a small, it should deal with the things that can deal with. It shouldn't try and deal with things that can't deal with. And when you talk about fiscal, it's not so much fiscal, you know, the size of the deficit. It's a lot of decisions we're making in Washington that affect the supply side. Things like what's our immigration policy? What's our tariff policy? What's our Middle East policy? All of these things are having an impact in the economy. The Fed can't offset this stuff.

And I think they're right to say they can't offset this stuff. And yet, Warsh used this phrase where he said, inflation must be the Federal Reserve's responsibility. And I disagree with them to the extent that, yeah, I mean, if they've got a responsibility, it's that. But even the inflation we've seen was not caused by the Fed, and they're not going to fix it. It's, you know, the only way the Fed can fix inflation is by put the economy in recession. And he doesn't intend to do that. But I just don't know what the Fed can do.

By the way, the odds, the Kalshi odds of Jerome Powell out as Fed governor before June, they're down. The odds are rising that he actually may stick. around. Mostly they leave. Why wouldn't you leave? Everyone, because you go make millions giving speeches. But I'm glad you brought this up, Brian. And Jeff, in the press conference, we're going to be listening because the way he's described his decision to leave has a lot to do with him knowing for sure and transparently that this probe is truly over. And he's going to basically, I think, tip his hat to whether he believes that standard has been met. Yeah, and Fed Chairman's Paul. And his defense, he's taking a lot of punches. And he was nominated

by Trump back in 2016, the last year has been pretty tough. But he may also want to see a decision on the Lisa Cook case, because I think much more than money, he values Fed independence. That is his core value. I think he might stick around until there's a resolution to that. Exactly. If he knows

that Lisa Cook is safe and therefore the president can only appoint... Well, now that seems political. Not his chair, but even on the Fed, he can be a vocal defender of Lisa Cook from this high perch. Well, a defender of the Fed's independence because it only gives the president two seats to fill instead of three. Oh, so not just a vocal defender, but actual

blocking another seat? Exactly. Just maintain that independence. Right. If Cook stays. If Cook stays, then I think Jerome Powell, when he knows that, then he will leave. But that seems more political than ever, where he's trying to fight for his independence that lists more political. No. He's fighting for Fed independence, which is something that I think both parties have agreed on. Which has been reiterated by the dissenters. And to Greg Gipp's point last hour, if his history is going to look back unkindly on what the Fed did during the inflation surge,

and to some extent blame him for that. But he's going to finish with this big move on Fed independence that probably he realizes offsets that. So, yes, if that's how, you know, people are going to look back on what he accomplished, of course he would stick it out. And make sure that that's fully, you know, settled in his mind. We'll see. Yeah, exactly. Waiting for Powell, there's an empty dais, by the way.

Jeff, so bottom line is stock markets been soaring the last couple weeks. Obviously, we had the shock. By the way, I want to be clear to David's point, I think the shock may not be over. I mean, the shock, the oil prices have been going up every day the last couple of days. But right now, Jeff, any sign of any hit to the markets run, stock markets run? I think there's still the off ramp in Iran that is causing indigestion. That's not affecting the S&P 500 hitting new all-time highs. Not yet.

Will it? But if we see these foreign names, meta, Amazon, Microsoft, Google report that earnings. And AI is delivering that kind of offsets the price of crude out at 107. So there's a lot of inputs here, but one thing I focus on is earnings. I will just point out he's never been late. You know, we're used to sitting here at 2.30 on the nose he's walking out, not to make too much of a bid.

Is this? There. Oh, there. And you said it. There is.