Power Lunch - Federal Reserve Hikes Rates for the First Time in Three Years 9/16/26

Episode Date: September 16, 2026

Major averages trade between gains and losses as investors react to the Fed’s decision to raise interest rates by a quarter percentage point, bringing the target range to between 3.75% and 4%.Kelly Evans and Brian Sullivan host the show live from Washington D.C., and are joined by Harris Financial Group’s Jamie Cox, Raymond James’ Larry Adam, JPMorgan’s David Kelly, and RBC’s Frances Donald to provide their initial takes and first reactions to the decision.CNBC’s Steve Liesman, Rick Santelli, and Matt Peterson also join the program to provide their insight and reporting ahead of Fed Chairman Kevin Warsh’s live press conference during the second half of the hour. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

All right, welcome, but welcome back, everybody. We have got a crucial hour ahead for the markets and your money. Welcome back, everybody, to our special Federal Reserve coverage live here in Washington, D.C., with Kelly. I am Bryant. And we are just about three minutes away from the Fed's interest rate decision with markets overwhelmingly pricing in a hike. Fed Watch futures put the odds at 90%. What, hey, there's a 10% chance. But for investors, the headline move may be only the beginning. The real catalyst could be the chair's comments on inflation growth and how much further policy may need to touch. That's coming around 2.30 p.m. Eastern. All right. So let's stop talking. Get right to our all-star panel to kick off this hour.

We are joined by Harris Financial Group managing partner, Jamie Cox, Raymond James, Chief Investment Officer Larry Adam, JPMorgan, Chief Global Strategist, David Kelly, and RBC Chief Economist. Francis, Donald, Francis, I am going to start with you because you probably heard me say moments ago, and I think you have said this in the past. Rate hike or not, I just don't know what the Fed can do about inflation related to oil and the straight-of-formos. That's what I want to hear from FedShare Warsh today. How is he thinking about these rate hikes actually transmitting to the real economy? Does he think they're really going to bring down inflation? If so, which kind? And is he aware of the side effects that come around rate hikes,

including how they're going to impact consumers at the lower end in particular? David Kelly, what are your expectations? Well, I do think they're going to tighten. I think Chairman Warsh has painted himself into the corner here, exactly as you've been talking about. If there's now a 90% probability they're going to raise rates, if they don't raise rates, people are going to assume that it's politically motivated. And so I don't like how they get to this decision.

I don't think they should be raising rates, but I think at this point they've got no choice. Okay, Larry, I think they're going to check the box and raise rates as well. But as everybody's been saying, I think it's all about the messaging. What does he come out and say? Because that's by far and away going to be the most important thing that happens at 2.30. Jamie, what's the real view from Richmond? For Richmond, we wish he wouldn't raise rates. I mean, those of us are Main Street in America's that want more things.

to cost more, particularly things that have interest rate involvement. I mean, it's just going to make housing more complicated. There's a lots of knock-on effects, I think, that are going to really, I think it's going to be a mistake for them to hike. I think I agree with you. Talk more about why, though, because what about the idea that it's the only way to kind of bring inflation more meaningfully back down? Well, what is the component of inflation? It's the why, right? I mean, we all know that this is a supply shock. We all know that there are problems with oil. The problem is that the war in Iran has not had to, it's not been punctuated. It started, then it stopped, and now it's restarted again. So the conditions haven't changed, but now we're going to change the interest

rate environment. That's, that's a problem. It's not something that they, they're not paying attention to what was the set of conditions just three, four months ago. Yeah, I mean, I agree it's being driven by the supply side, energy prices, what's happening with tariffs. But the reality is, when it comes to things that typically the Fed looks at, savings rate is at near historical lows. And when you look at what's happening at wages, they're probably. pretty much been contained. So it's not really being driven by the demand side of the economy right now. David Kelly? Well, that's exactly it. I mean, if you look at inflation expectations built into the tips market, they haven't spiked. And just as you're saying, this is the lowest year-over-year

wage growth we've seen in five years and not a scintilla of evidence that this, whatever demand there's in the economy is actually generating more inflation. We think growth will slow next year. We think inflation will come down next year. And the Fed really, to just be patient here, but it's kind of hard to be patient. I mean, it's really a problem of, that's why we need forward guidance. There's a clarity in forward guidance, and there's an awkwardness in forward silence, and that is what's left us in this predicament. Dow's almost unchanged as we get to Steve Leesman for the decision, Steve. Federal Reserve raising interest rates by one quarter point in the unanimous 12 to zero vote.

New funds right now in a range of 375 to 4%. The Federal Reserve saying this action is intended to, quote, support a time. timelier return to the Fed's 2% inflation target. Inflation, the statement says, remains elevated. The committee will deliver price stability, a repeat of a line in the last statement. Uncertainty is elevated due to geopolitical developments. Spending is resilient. Productivity is strong, and the CAPEX is robust. Job gains are keeping pace with the workforce growth. In the summary of economic projections, it shows one or more hikes, one more hike, sorry, an additional hike is expected this year by 16 of the next.

the 18 members. It appears that Kevin Worse, the Fed chairman, did not submit his forecast again. Four of those 16 dots, by the way, see three hikes, two forecasts, just one hike. Eight, that is, almost half the committee, not quite. See the funds rate rising eventually to 4.4% or 4.38% next year. Ten see the Fed stopping at 4.1%. Most do not see the Fed funds rate declining until 2028. These are the forecasts. They're not promises, but just the dots that people set for where they think the appropriate funds rate will be in the years ahead. There's a lower unemployment rate forecast that was lowered for this year to 4.1 to 4.4. That's the average of the forecast. Slightly higher inflation, 3-4 from 3.3. The 2% target hit is not hit now until 2029. I'll

leave it there. Wow. So looking at this here again, the market reaction, not, I don't want to say is muted, Kelly, but the market kind of where it was beforehand. Let's go now out of Rick San Telly for reaction in the bond market. And Rick, again, I don't want to speak for the market, but the market is speaking for itself. Stock markets are up. Bon yields about where they were. I think whether we agree or not, I want to hear, of course, Rick, if you agree or not, the stock market got what it wanted. Yeah, I'm not sure that the stock market really knows what it wants. I'll give you an example. Today, Atlanta GDP for the third quarter moved from 4.4 to 5.1. It obviously is understanding what the rate cycle looks like at the Atlanta Fed and to see

minus 63 points now in the Dow. You know, interest rates going up is a mixed blessing. Some of it's for good reasons like retail sales today. Some of it's for not so good reasons like what's going on in the mid-east. I like to look at the 210 curve here because everybody thought they were going to see this major dropping yields in the tenure if they raised rates. Well, we're not not. We see that we went from 494, down a little bit. Now we're at 495. On the two year it was at 460. It went basically down a little bit. Now it's back up. Actually, the two years been the most aggressive. So we are seeing a little bit of flattening. We're at 35 on the 210. Now we're at 32. What does that mean in English? It doesn't mean that the 10 years driving that, 10 year rate's not

going down. But the two-year rate reflecting some of the sentiments by some of the Fed officials looking for more hikes, well, that's at least for the moment propelling slightly higher yields in the short end. If you look at all the intradate charts, you can see that we shot up close to $4.65 in that two-year. You can see what's going on in the 10-year. It continues to hover below that 5%. One close above 5%. And the dollar index might be the most interesting of all because it really is getting a nice little bid here and that makes sense. It had been

kind of counterintuitive to many of the interest rate moves of late. And finally, the last point I'd like to make is that we need to continue to monitor corporate and sovereign issuance. I think at this point, that's one of the real-time dynamics to really understand some of the

nervousness regarding interest rates. It was 12 to nothing, Rick Santelli, which means Kevin Warsh voted for the rate hike. Do you think that Warsh and or the Fed was bullied by the bond market? I don't think bullied. I think symbiotic or reflective is probably the words I would use. So, Rick, stand by. It's a bat this around a little bit. In fact, let's bring in another market voice who just lowered his price target earlier. I think today, Ed Yardini president

at Yardini Research. Ed, does this act, can you raise it again now that they're raising by a quarter and saying they're going to try to do more to fight inflation this way? Well, I think all the signals, especially from the summary of economic projections, is that this is the beginning of a rate hiking cycle. They're talking about another rate hike before the end of the year and another one next year. I mean, this is what they're doing is listening to the markets. That's what the two-year Treasury has been saying for the past few weeks. As an addition, the futures market has been indicating that it's not going to be just one and done. Is there, so Ed, normally, you might argue, okay, the Fed be getting another tightening cycle could slow kind of the stock market rally or be a headwin there.

But you had just lowered your price target because you were worried about the backup in bond yields. It would lower the multiple where we were trading. So again, does this action in a weird way actually make you more bullish than you would have been otherwise? No, not really. I mean, I expected the 25 basis point hike. I think everybody expected it. There was kind of a lot of excitement about something that turned out to be very much predicted. So nothing really changes.

My concerns are really the whole geopolitical situation. We're becoming very calm about what's going on in the Middle East with the price of oil, with the hoodies possibly challenging another important street for transportation or for navigation. And so I'm watching the price of oil as a big concern. And higher for longer oil prices mean higher for longer interest rates and Fed tightening. But look, I think the economy is amazingly resilient. We just saw that in retail sales. I mean, I think these interest rates, to a large extent, reflect the resilience of the economy.

Francis Donald, you're probably familiar with the band Who. Meet the new boss, same as the old boss. And I'm just wondering if we learned today that the old boss and the new boss are the same boss, and that is the bond market, because it appears that Kevin Warsh, whatever his internal feelings, he moved with what the bond market and the stock market wanted to do. Well, whoever the boss is, Brian, they were very successful because this is a full-on consensus hike today and at least one more full consensus. And that's critical because it tells us that this Federal Reserve is more in the, let's undo those insurance.

cuts from last year, but not indicating yet this is going to be an old-fashioned traditional tightening cycle. That would have been more problematic for market. Second thing I love in this statement is the word timeliness. This is a Fed that wants to get back to 2%. In a more timely matter, they say, but look at those forecasts. Still don't expect PCE to get back to 2% till 2029. Reminder, we've been above target for five years. We're going to add on another two and a half years to that. I'm not sure that fits my definition of timeliness, but some interesting details in this projections today. All right. We're going to bring it back to our panel here in a second, but Steve Leesman has more over at the Fed building. Steve? Yeah, I want to talk about this

notion that Brian has about the bond market bullying the Fed chairman. And I would point out, Brian, if Kevin Warsh called you, called me, called Kelly, we would take his call and report anything that he would say to us on the record. And the reason I bring this up is because Kevin Worse created the preconditions for the market to price it, to price it, to price the Fed the way it did. He had multiple opportunities if he was unsatisfied or unhappy with the way the market was priced to change that. He did not. No other Fed official really did. So I think Kevin Warsh got the reaction he wanted and he had the market set up the way he wanted it. If he did not, I'm just pointing out, Brian, he had multiple opportunities. Many outlets would take his call to change

that outlook. Well, okay. So let me flip it then because let me let me get rid of the word bullied. Okay, how about this? Did he, did he show, I think to Rick's point, Steve, the appropriate flexibility, and even if it wasn't what he wanted to do, maybe in his gut of guts, he didn't want to raise rates, but if the other 11 members wanted to raise rates that Warsh showed a flexibility that maybe the market likes, because they said, okay, he's a guy with his opinions, he's the chair of the Fed, he's the boss of the Fed, but he's willing to be flexible based on group consensus? Better? I don't think

Kevin Worse was drag, kicking and screaming into this rate hike. I think what we're seeing, and I like what you were saying just a minute earlier, which is, I think we're seeing the true Kevin Worse, who's a hawk, and this word timeliness, you could turn that around and look at the other side of the coin of

timeliness means he is not satisfied with this pace, and he would like to get inflation under control, wants to show inflation under control. There are people who believe that the Fed chair showed a certain dovishness in the campaigning to become Fed chair, but deep down this is who he is, a guy who is serious about bringing down inflation and a guy who is frustrated and criticized, by the way, the Fed under chair Jay Powell for not being strong enough and

bringing down inflation or quick enough. This word timing that speaks a lot to me from the Fed, an institution that is known to be super patient. And the fascinating thing about Fed moves is Sometimes you get a big reaction on the day of, and sometimes it takes a few weeks to set in and establish these new trading patterns. Let's get back to our panel on that. Larry, what do you expect now that they've begun this? And how much is writing on the press conference and the way he chooses to cast the path there? Yeah, I would say the statement was pretty much the facts. And now we're going to wait for the color commentary because, you know, he said he doesn't want to do guidance, but you can do guidance by just reflecting at what's happened, right, by stating some other facts.

For example, if he talks about the fact that the consumer has had a lot of stimulus because of the tax, cuts that they received, that's starting to run out, right? So what happens there? If energy prices were to start to come down because we've got some resolution, right? What's the decision tree that we're going to have to look at going forward? I think the market would love to see that. Jamie, Cox, jump in here? You know, I think it just leaves more questions than answers. I mean, you raise interest rates. How many, now you've got, how many more times are they going to raise interest rates? Two, three, four, whatever. Zero. Why does that be more? Well, the market's already pricing in. One and mum. That's, that's,

That's right. There's only been one time in history that they've raised interest rates once. I mean, they've always raised them more than that. So it's just when it's what's called a hiking cycle, not just a hike. Yeah, but we also, sorry to jump in, but we also have the greatest energy supply shock in the history of the world. Oh, you're talking, you're just preaching to the choir. I know. That's why I'm saying. I know what they're just trying to sort of kneecap that a little bit in the way they can. But it doesn't have to imply that it's a start of some longer term cycle because inflation may be only related to what's happening across the Middle East. I agree 100% with what you're. saying the question is perfect. I knew I liked you. The one part about this that's interesting

is that, you know, we had both a supply shock and a brand new Fed share all at the same time, and the market is trying to test him. Is he in control or is someone else on the outside controlling the Fed? I think Kevin Warsh actually answered that question today. He's in control the Fed. And I think that for the market may have been the most important thing that happened so far today. Matt Peterson, yeah. President Donald Trump is also not in control the Fed. That's another not very subtle message that Kevin Warsh is sending. I mean, you know, in that that eight minutes that I was off air. I shot an email over to the White House. Say, what do you guys think about this? They got to answer this. It's going to be an interesting

moment for them. You know, the president- Did they write back. They did not write back. Believe me, I will tell you the minute that they do, but they have the equivalent of a loaded gun pointed at the Fed here. They have gone through the process of saying Lisa Cook, Fed Governor, you are on notice. We could fire you at any moment. They could reopen the criminal investigation into Jerome Powell at any moment. You know, they could do a lot to make Kevin Warsh's life pretty difficult here he has invited that. He said, I don't care what you think. I don't care what you do. You know, the one thing, getting back to Ed Yardinney, I think it's important to recognize that. I don't think these interests rates do anything to the equity market. If you look at the

percentage of profits that's used to pay interest payments, it's its 5%. Back in 2000, it was a 35% of dollars. It's minuscule. It's minuscule. I don't think it's really going to impact the equity market going forward. And with profits remaining strong and corporate balance is remaining pretty healthy, I don't think this is going. But you name check Ed Yardini, who, to Kelly's point this morning, cut his fore. forecast on the S&P 500. And by the way, why am I speaking for Ed Yardini? We still have him here, I believe.

So, Ed, you can, I don't need to speak for you. Jump in and tell us more about the decision to lower your target for this year, but actually you have a 10,000 target by the end of the decade on the S&P 500. I went from 8,400 to 7,900. I mean, 7,900 would still be a record high. And by the end of the year, the 8,400, I'm now just pushing out to the middle of next year. I just think that with all the ambiguity and concerns about AI, I think some of the AI momentum is going to continue to kind of fizzle out here. I think I've been thinking that the

bond yield should be between four and five percent. If it kind of hangs around five percent, I think that's going to erode the valuation multiple somewhat. Earnings, I think, are going to be fantastic. I haven't changed my earnings outlook. I think the economy is doing absolutely just fine. And oh, by the way, I don't think it's one and done. I think we are going to see a couple more rate hikes along the way here. So I just thought that it just made more sense to kind of stretch things out a little bit in terms of when we get to 8400. But the basic message is, this is the roaring 2020s. The earnings are certainly confirming that. And the only question is the valuation multiple along the way. And I just shaved the valuation multiple a little bit here,

recognizing that we've got higher for longer oil prices that could lead to a tightening cycle by the Fed. But again, I think the economy is bulletproof. I mean, it's been phenomenally strong since the beginning of the decade. I think it's going to remain strong. Yeah. David Kelly, jump in here. Yeah, I'm not sure the economy is quite as strong as, you know, we did get a benefit in the third quarter out of balancing inventories after inventories fell for five quarters. And also we still have the income tax refunds, which actually fed into consumer spending.

But what I think is really interesting here is this 12-0 vote. That may give people the impression the Fed is really hawkish. I don't think it is, though. I think what happened here is that the committee rallied around Kevin Warsh. Kevin Warsh knew that his rhetoric meant that they had to hike, but he didn't want to do it 8, 4, 9, 3, 10, 2. He wanted that unanimity so the Fed can maintain its independence. The administration can't just pick on him and say, why did you vote for this?

They can, you know, well, look, it's a whole committee. We're united. And I think that says to me, as a number of things they've done in recent months say to me, they're still very determined to maintain Fed independence. I think that 12-0 vote says Fed independence much more than unanimity in terms of what they should do right now. Rick Santelli, what's it called when the yield curve flattens, which I'm seeing by like eight basis points, but it's the short ends going up and the long end's coming down. What is that called and what is that telling us?

Well, right now with yields being down, that means price are up, so they call that a bullish flattening. I'm not sure, though, that I want to touch that and give you the kind of answer history would dictate. History would dictate that that is telling us a cycle of tightening might be out there, and the long end not driving that might tell us that it might in some ways benefit the economy. But it's hard to say because of the war. Once again, I will say without a doubt in my mind, two things. 93% and you're a new Fed chief and guidance isn't your cup of tea, there is no way you're not going to use that signal.

I don't think it's an antagonistic relationship. As a matter of fact, I think it is so far from the patent place everybody wants to make this group and this chairman. I think it's quite calculating in terms of what he did. And I think when I look at the economy and I listen to Ed, Ed is downgrading his outlook for a reason. And once again, I think all reasons, lead to the Middle East. The stock market doesn't like it. And the longer it goes on, the equity

markets are going to pay a price and the interest rate complex is going to be stuck at yields that are higher than normal. And I think all of this, of course, will turn green. And anybody lucky enough out there to be viewing that gets long 24 hours before the war ends, they will be the champions and win all the accolades of trading for 2026. This is why we did. 27, if it happens then. We love having you on, Rick, and I know it's our last Fed meeting together. You're not gone tomorrow, but it's our last Fed meeting.

This is why we love having you on. Steve Lee, so we know you've got to jump into lockups. So very quickly, politics are part of this. You'd like it or not? We're here in D.C. for a reason, did Kevin Warsh prove he maybe is the more independent Fed chair than many people thought he might be a couple of months ago? I think that's an added benefit, but I really do not think that Kevin Warsh or the other 11 members of the FOMC raised rates for the political reasons. What I do think it's fascinating is this bit of a

debate between David Kelly and Ed Yardini about how strong the economy is. And what makes me think about, if I could translate it into the less understandable Fed speak, it raises the question about where the neutral rate may be. And that's the question, which is the Fed may have fallen behind the curve here with all of the AI investment. And I was shocked, I have to say, by the retail sales number this morning, showing the resilient consumer in the face of high oil prices, just kind of ignoring it. It may be the Fed has more work to do here to slow this economy than it had to do before because some of the policies of the administration have turned around to run this economy a little hotter than it had been running. And so in order to get in front of this

situation, that's why that 437 funds rate in the forecast among some members of the committee strikes me as something to be thinking strongly about. Everyone, rap? That's a wrap. Yeah? What do you think? Not for the whole show. No, of course not. Of course not. We have a huge amount to still get to. But Rick, Steve and Matt, thank you for now. Maybe. We almost hit, I think, the CBC Octobox. Did we hit 8th? You put Alice in the middle and B Waters? And we're just a few minutes away from Chairman Warsh's press conference.

We'll take you there live as soon as it happens. But first, we will take a quick break. Stay with us. Welcome back for just moments away from Fed Chair, Kevin Warsh's press conference on today's rate decision. And if you think it's been kind of interesting up until now, just wait. Let's welcome back our panel. Still with us on set, Harris Financial Group Managing Partner Jamie Cox. I almost want to go around and say if you liked or didn't like, we're not going to get into that. Ray J. Chief Investment Officer Larry Adam, former Philly Fed President Patrick Harker.

And with us remotely, JPMorgan Asset Management's chief global strategist David Kelly, RBC's chief economist Francis Donald, and Yardini Research President Ed Yardine. Denny. So in the moments that we have in the press conferences, you guys know more than we, is often the moment where you could see complete counter-trend rallies. All the hawkishness we're talking about now could be a race with it. If he talks about, maybe this is going to be a one-and-done. So Mr. Harker, first to you, what are your expectations? What are the risks around us? No, it's not going to be a one-and-done. I think two this years you can pretty much bake in. And that's what you saw in the SEC. So, yeah, he's not going to talk much about that because he doesn't fill out the dot.

So, but I just think we have to be prepared for two rate cuts for this year. Two rate hikes. One more, one more. I mean, right hikes, yeah. We'll go around the table here quickly first, Larry. I'm hoping it's only a one and done because I agree with David Kelly and our own economist that this economy is starting to show some signs of softness. So we're only looking for one.

But I think during this press conference, he's going to do everything he can to keep the flexibility of the Fed open and say that they're data dependent. Is that a risk in some ways, or is that an opportunity if he doesn't commit to more rate hikes. So I think as long as he puts out the decision tree of what they're actually looking at, that's what he needs to do. Whether it's one or two like we talked about, I don't think that has a big impact on the economy,

because it's the higher-end consumer driving this economy. It's the big companies driving. They're not really as interest rate sensitive. But as you brought up before, what is going to be negatively impacted? The rest of America, middle-combed America, lower-income America. And I think the Fed has always looked out. They've been talking about trying to broaden. Jaby?

Yeah, that's where I live. in the real world with all the middle Americans. And raising interest rates just hurts us. And there's a lot more of us than there are rich people. And so we're going to vote coming up. But the fine, but borrowing costs may come down, Jamie. That's the point. The market got what it wanted.

I know it sounds weird, but a rate hike may result in lower borrowing costs. Over time. Notice I said, may, so I can hedge my bed. Over time. Not yet. But the Fed thinks it's helping the people you're describing. No. I mean, if you want to buy a house,

good luck. You know, it's already expensive. It's going to be more expensive. If you have a credit card, your interest rate just went up. I mean, you know, it has real impacts. And that's the point because it's trying to, it's going to lower demand. Francis Donald, do you think that higher rates could lead to lower borrowing costs? I know I have not been drinking. That's a bit of a stretch here, Brian, but I just want to emphasize something here. You talked a lot about energy. Energy is one issue. It's not the whole issue with inflation. Fifty-five percent of the CPI items are up above 3% and they are weighing on consumers. There's a line today that says domestic spending has been resilient, yes, supported by the upper end, but look under the surface of consumer activity.

Americans are borrowing more. Delinquencies are already up and real wages have been negative since April. So now that we have the hike in the system, we're watching those channels really closely because this was a medicine, but it's going to come with side effects. It's going to get consumers. Here's my question. Maybe we can't answer it. Are Americans borrowing more because they want to, or are they borrowing more because they have to? Because if they want to, that's a good thing. Because they have to. Savings have come down in response.

Food costs, energy costs. This is the lower and middle income consumer facing a very different economy than what we see on the aggregate. It is, I know we're tired of talking about, it's still very real. It is the case shape and play. This is going to be the biggest challenge for the Fed,

not necessarily disaggregating between supply and demand, but being aware of the distributional impacts of Fed hikes. We saw this in 2023. We're going to see it again now. David Kelly. I think there's going to have to be some dovishness in his tone here because I think one of his goals here is going to be taking an October rate hike off the table because it really doesn't make sense to raise rates one week before the midterm elections. The midterm elections themselves actually have a significant impact on the inflation outlook. If you've got a divided Congress or divided government, then there's less chance of fiscal stimulus.

And the president may well be right that Iran would be more willing to do a deal after the midterm elections are over. So I think it makes all the sense in the world for the Fed to propose now and wait at least until December. So I think we may, you know, after a hoaxish statement and a hoaxish action, I think we might see a little bit more dovishness out of this press conference. Professor Hart, do you want to jump in? They're not going to raise in October. I think you just take that off the table, in my view, just because of the optics of it, if nothing else. I mean, they're not going to raise October.

Yeah, they're not going to raise. But you think they will raise again. So they raise it in December. Later in year, yep. So you raise now, take October off to kind of assess the data, right? And then in December, raise again, because is there a part of it? Maybe you don't want to answer this. That's the story, but the reality is an election coming out.

Why is that the story? Why is that the story? Oh, because the election. Yeah, exactly. But there were some rate cuts ahead of the 2024 election. Yeah, you're not going to see that this time around, I don't think. Okay. And so who we still have, Ed, Yardinny standing by, Ed, if you could kind of in here.

I know it's not, you know, you're wherewithal to necessarily focus on every tick during the press conference. But what are the risks or opportunities around the discussion we're about to hear from the Fed chair himself? Well, I think he really locked himself in from the get-go by stressing that he wants price stability and that he wants to get there sooner rather than later. So I think he's going to have to kind of stay with his hawkish bent because quarter point isn't going to do anything here. I think he's kind of locked himself into kind of following the markets, and the markets have been taking them down the road of raising rates. But the markets, Ed, if I'm not mistaken, this was Deutsche Bank this morning, have a point

of tightening baked in across the curve now. So if he thinks that's too much, won't he have to push against it? Well, I think he's told us that he respects what the market's opinion is. He himself said he didn't want to talk too much. He didn't want to influence the markets. he wanted to see how the markets interpret the data. And I think a lot of this has to do with the Middle East for sure. I mean, well, prices are back over $100. That's a big deal. Maybe they'll come right back down after the midterms, but I'm not so sure.

Well, it might come back down after the midterms because we do something different with Iran, but that's a different show on a different time. Larry Adam, 50 seconds left. Does the stock market higher or lower one year from now? I think it's higher. I think even with today, stock market's higher. You may get a couple of months of volatility. which typically happens when you get a new interest rate cycle start it.

But the bottom line is 12 months later, they're still here positive. This time around earnings power, we're looking for 30% earnings growth this year, 15 next year. And as everybody's been talking about, the PE multiples come down from 22, down to 19. It's a pretty attractive area to get into the market right now. The Fed raised rates in 94 and the Dow soared in 95, Jamie. Yeah, after the rate cycle ended. That's the point. Once we find the end point, then you can start to forecast out what the –

it's not going to be very long. They kind of told us that. Two to three times, max, after that the market moves. That's why 12 months from now you can safely say that markets are going to be higher. But what you said, we should just dwell on that for one extra second. And when they stopped the tightening cycle in 94, that was when people could kind of exhale and say, okay, now we're at the beginning right now, but the markets already want to know where the end is. What happened in the latest hiking cycle, too?

The market was terrible during the 22 episode or whatever. Afterwards, it propelled forward. It's sort of the template. And so that's why it would probably be fine for 27. I mean, it's not like it's going to kill off the AI infrastructure. But there is a risk that because if you go back to 22 and here comes the Fed Chair, but, you know, it was lower rates that did help propel a lot of this. So with no further ado, FedShair, Kevin Warsh. Good day.

In the meeting just concluded, the FOMC decided to raise the target range for the federal funds rate by a quarter of a percentage point to three and three-and-three-quarter. to 4% in support of the Federal Reserve's dual mandate. The committee is continuing its policy of maintaining ample reserves in the banking system. As noted in the policy statement, released just a short while ago, economic activity is expanding at a solid pace. While uncertainty remains elevated, owing in part to geopolitical developments, domestic spending has been resilient. productivity growth, strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little. But inflation remains elevated.

Today's policy action will support a timelier return to the committee's 2% goal. This committee will deliver price stability. Now I'll get into some further detail. Our decision comes at a time when the American economy appears to be strengthening, new hiring, private sector earnings, business capital investment. Each of these markers has improved in recent months and is pointing in a good direction. Credit flows have been robust, particularly for businesses. And as I said at the Policy Symposium in Jackson Hole, I would be hard-pressed to describe broad financial conditions as restrictive.

This view was widely shared by the committee. So we removed a dose of accommodation. Consider the geopolitical landscape of shocks and uncertainty, and you begin to appreciate the resilience of the U.S. economy. Given that resilience and the potential for even greater performance, an attitude of optimism is exactly what I heard inside the FOMC these last two days. One basic sign of strength is the state of America's labor markets. The jobless rate remains low at around 4.1 percent, and both job openings and weekly hours have been increasing.

Unemployment claims, on a four-week moving average, are running at levels consistent with full employment. So the labor side of the Fed's congressional remit is in good shape. yet for more than five years, inflation has been running above target. So our predominant focus is on the price stability side of our mandate. The plain fact is that inflation is too high and has been for too long. This summer's inflation readings do not tell me that underlying trends have meaningfully improved. Based on the most recent CPI and PPI data, the 12-month change in 20, total PC prices likely was around 3.6% in August. Core PCE and CPI prices running at about 3.2

and 2.4% respectively. Too many categories are still posting increases above 3% on both a 6th and 12-month basis. I noted in Jackson Hole that overall commodity prices also bear watching. And over the intermediate period, the price. of many of these key inputs have risen. Since my first FOMC meeting as chairman in June, my colleagues and I have been unequivocal in our commitment to price stability and to our 2% PCE inflation objective. At our July meeting, we all agreed that inflation remained too high, and we expressed our joint readiness to act as circumstances might require. and a good majority of my colleagues and I thought the wiser course then would be to await new information in the intermeeting period.

Last month in Wyoming, I expressed my commitment to a monetary policy discipline, not to a decision. I define the standard for action. We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Today, the FOMC decided that this standard has not been satisfied. The committee's unanimous vote shows our resolve to achieve price stability on a timelier basis. We aim to ensure that credit and financial conditions are consistent over time with our mandate, that relative price changes in some sectors of the economy do not broaden, That inflation compensation in market prices stays low, and that inflation expectations remain well anchored.

This afternoon, you also received the summary of economic projections. It reflects the views of my colleagues on the committee, but as in June, I have not offered a projection of my own. But like in June, I said I would faithfully discharge the summary of their projections, so here goes. In the summary's median projections, real GDP rises at 2.3% this year, 2.4% next year. Total PC inflation runs at 3.7% this year and falls to 2.3% next year. The unemployment rate holds steady at about 4.1%. The median participant judges that the appropriate federal funds rate to be 4.1% at the end of this year, and to remain there next year.

Inflation risks are to the upside, while labor risks are roughly balanced. In my meetings these last few weeks, in Jackson Hole, in Asheville at the G20 meeting, which the U.S. hosted, and at a central bank conference in Basel, it was evident that most advanced economies are facing price pressures. Their central banks are making their own judgments, consistent with, their own remits. Our decision today reflects our best judgment in service to our remit. The Fed has a role in sustaining the economic progress happening in America right now, and the rising opportunities that come with it. Those who are leased well-off have the most to gain from a durable expansion, a solid labor market, and stable prices. We at the Fed are unwavering in our vital

and straightforward purpose, full employment and price stability, and a thriving American economy that sets the standard for the world. And with that, I'll take a few of your questions. Chair, Wash, thank you for doing this. I'm Richard Escobito with CBS. Let me navigate over my questions. You know, a quarter point rate hike does not reopen the straight of poor moves. And so I wonder how you think these smaller rate hikes will be effective when it can't necessarily address the energy supply side of inflationary pressures. It's a good question, Richard. We cannot affect any individual price, whether it be oil prices, whether it be food

stuffs at the grocery store. What we can do and will do is ensure that any change in relative prices don't broaden out, don't have second and third order effects in the economy. That's what we're tasked to do, and that's what we will do. Thank you, Colby Swift in the New York Times. When the Fed starts raising rates, it generally follows with a sequence of hikes. Is there anything different in today's assessment of the economic conditions that would suggest that the typical pattern does not apply? And I guess second to that, what impact do you expect higher rates to have at this juncture if the bulk of what is keeping inflation elevated is stemming from supply shocks?

So we're trying to get to more people. So I know I get to cherry pick my preferred question from you, Colby. This won't surprise you. I'm not in the forward guidance business. The decision we made today was a sober decision, serious decision, responsible decision, one that we have been preparing for and thinking about in my 110 or 20 days here. You heard from other people in the dots effectively what their forecasts are. I'm not going to prejudge any future decisions we make. You might have heard me saying, Jackson Hole, I committed to a discipline, a set of principles.

I committed to look outside the window and see what I can observe. That's what I did in Jackson. That's what we did today. Thank you, Mr. Chairman. Edward Lawrence, Irm Fox Business. So the market priced in a 90% chance of a rate hike today. You don't want the Fed to lead the markets. Was this a market-led rate hike? And then with that, the bond yields are going up. That's one of the indicators.

Is debt part of that issue? So I've said this before. I'll repeat it. the Fed has an enormous amount of power. These are decisions we make. But getting the understanding right between financial markets and the Fed is a balance that I've long thought could be better struck. We made this decision today based on our assessment of the situation, based on our assessment of the trajectory for employment, based on our judgment on the strength of the economy. Sometimes the market tries to prejudge our

I'll observe market prices and see what they have to say, but today was our decision. Thanks so much, Elizabeth Shulsey with ABC News. Big picture, I wonder if you could tell us just what will this move today actually do for American consumers and have to ask, what is your message here to President Trump, who has repeatedly called to cut interest rates, not raise them? I've got nothing for you on a discussion with the president, but I won't make that count as your question. on the American people, as I said in my prepared remarks, the least well-off are the ones have the most to gain from stable prices.

The decision we made today was the right decision to deliver on the remit that Congress gave us to ensure stable prices. Moreover, I would say because of the underlying strength of the economy, because we are, as I mentioned, largely acting consistent with full employment, we can be focused on stable prices. Some months ago I said we will deliver stable prices. Today's action is consistent with that. Hi, how are you? Thank you. Can you tell us a little more about what changed from the July meeting when, as you noted, the Fed did stand pat until today? And as part of that, could you give us a sense of whether or not things like the retail sales report today suggested that demand is heating up and possibly threatening higher prices as well?

Thank you. Yeah. So as you might know, I'm not a data. point-dependent guy, so I won't react one way or another to data that shows up on our doorstep. But on your first question, I think the more important one, what transpired in the seven weeks since we last met? First, I would say a good majority, my colleague seven weeks ago, thought seven weeks is a good investment. It's a way to buy time so we can make a wise decision. I'll highlight three things that have happened in that intermeeting period. One is, I may have had

a judgment seven weeks ago about the strength of the economy, there's been a pretty wide-ranging set of data, including the labor markets, that the economy has strengthened. You might have heard me say that in Jackson Hole a few weeks ago. It's a judgment that I have and the committee has. Second, inflation trends. I said in Jackson Hole, trends matter. I said in Jackson Hole, we need to look outside the window and interrogate reality. My judgment some weeks ago was the inflation. summer trends weren't passing the test. I've seen very little information since that would make me reverse that decision. So I've stuck with it. And the third thing that's changed in seven weeks are geopolitics. There's no hiding from hotspots around the world. And our judgment about

what is the most likely or least likely of the geopolitical situation has changed. All three of those things lend themselves to a firm unanimous decision today. times. You said today's decision removes a dose of accommodation in your view, and perhaps if you could share views around the table too, are interest rates now at a level that you would describe as restrictive or not? Thank you. I've described previously, I found it difficult to describe financial conditions as restrictive. I think I said I was hard-pressed. What I heard around the table in the last couple of days is my colleagues were hard-pressed to describe it that way, too. We removed a dose of accommodation so that financial and credit conditions would be more consistent with our ultimate objectives.

That was the decision. That was our judgment. And we'll continue to evaluate that prospectively. Thank you, Mr. Chairman. Steve Leasman, CNBC. I want to follow up on that question. And previously, most Fed officials have described the rate as modestly restrictive. And if you removed accommodation, could you give us your sense of where the Fed funds rate is relative to neutral? And some detail, if you wouldn't mind, on your sense of, is there a short-term neutral rate you're aiming for and a longer-term neutral rate? Do you think in terms of those? In a word no. In a few words, I'd say this.

I've always been interested in a neutral rate as an academic matter. Back when I learned economics, we used to think of it as a Wixelian rate. It's a real equilibrium rate. It's useful academically. It's a discussion to help us think about policy. Do I think it has any operational effect on decisions that we make today? No, I don't. Hi, Victoria Guido with Politico.

I wanted to ask, you've talked about how you don't like data to including today. But heading into this meeting, there was a ton of focus on the August CPI. And I'm wondering if you think that that was appropriate on the part of markets, or if you've learned anything about how you might approach communications going forward? So market participants and reporters, I think generally over the course of the last decade or so, have grown accustomed to wading somewhat breathlessly on a data point. That isn't my view. I was not waiting breathlessly on what any particular data was, whether it was retail sales this morning or a CPI print last week. I'll just reiterate, trends matter. Data points are noisy. Data point dependence is a dangerous preoccupation. It's not something that concerns me. Markets over time will come to understand how this Fed makes its decisions, what's relevant. and not, and I wouldn't want to editorialize that for them beyond it.

Thanks for doing this, Mr. Chairman, Zach Halliak, the Washington Examiner. I'm just curious. A couple weeks ago, the president sent out a message, essentially threatening to cut off trade to certain countries unless rates were lowered. Obviously, an unanimous decision to do the opposite. What would you say to investors who sort of believe this is another test of the Fed's independence? And then when was the last time you spoke with the president? Do you anticipate a post-decision meeting? You gave me a long menu from which to choose. There are. all very tempting. I don't have anything for you on discussions with the president. And I'm not a

Wall Street newsletter. Part of the independence of the Federal Reserve is we stay in our lane. Independence is a two-way street. We'll let people that do trade policy and fiscal policy stay in their lane too. That's how we can stand up here and call them the way we see them. Hi there, Brian Chung with NBC News. Just wondering if you could explain who is the lease wall-off and what does a rate hike do when those people might be pinched by higher mortgage rates, higher gas, higher grocery prices, and now broad higher rates? Yeah. It's a fair question.

In the macroeconomics, we tend to look at aggregates around here. Aggregate GDP, overall labor market trends, the state of inflation. A lot of people in Washington spend a lot of time on distributional consequences, and that's their job and their business. What I was referring to in the least well off tend to be people that don't, own financial assets. Call that a bit less than 50% of the country. They don't have equity in their home. They don't have equity in a 401k plan. So they're living off their paycheck that comes every couple of weeks. The thing that we can do consistent with our mandate is two things.

Ask ourselves, is the country running more or less at full employment? And we've done that. That doesn't mean that individuals aren't searching for a job, but in aggregate, we're running more or less at full employment. If so, we can then look at the other side of our mandate and let that be our focus. In stable prices, an environment where inflation is running consistent with our 2% objective, offers good news because that way when they get their wages, they can put their head above water and deliver real take-home pay increases. We don't have total responsibility for it, but we do have responsibility for stable prices, as I've said before, inflation is a choice, And today we took a step in delivering it.

Yeah, sorry. Miriam Le Mette from Agence France Press, AFP. Are you looking at the other central banks? And what do you think about the European Central Bank's move? They hike twice this year, but not in a row. Thank you. Well, I don't ask them to prejudge decisions that we're going to make, so I won't prejudge decisions that they make.

But I will say this. I've spent some time with foreign central bank counterpart parts, not just in the last 20 years, but over the course the last several weeks, as I mentioned, in Jackson Hole. At the G20 meeting, we hosted in North Carolina and at a central bank meeting in Basel. What I heard around the table from most of the advanced economies is they're suffering from price pressures, too. They're making their own choices consistent with their remit. it tells me a couple things. One is when the Federal Reserve makes a policy choice, it matters not just to the U.S. economy, but it spills over to the rest of the world. To a lesser extent that's true for them too. When foreign central banks make decisions where they're confronted with higher prices and they choose, consistent with their remit, to raise rates, then they're helping to quash inflation in their countries and their spillovers and spillbacks in both directions. Beyond that, I won't open. pine on what other central banks may choose to do this week or beyond.

Thank you, Nick Timoros of the Wall Street Journal. Chairman Warsh, last fall, you expressed concern that the Fed was about to make its, quote, sixth or seventh big mistake by deciding the economy was too strong to justify lower rates. Now, today you raised rates. Can you give some sense as to what changed your own assessment of the U.S. economy between then and now? So I don't remember the full context, but I can tell you, Nick about the state of growth now. My suspicion, 110 or 20 days ago when I showed up, was that the U.S. economy was strengthening. Even over the last several weeks, I think we now have

data broadly defined that says the economy has indeed strengthened. Underlying growth is higher. Inflation is the problem. Stable prices have been the problem for now more than five and a half years. So what the committee decided to do today was taking action to ensure a timely return to our price stability objective. Price stability is foundational to economic growth, and I think we took an important step today to deliver it. And we did it in part by removing the dose of accommodation that I mentioned before. Thank you, Mr. Chairman. Neil Irwin with Axios. Longer-term bond yields are up quite a bit over the last few months, especially the last few weeks. What do you believe the bond market is telling you, especially about the growth outlook, the neutral rate?

and what are the implications for monetary policy? Yeah. Let me speak to the history. What bond market prices do prospectively, I want to let them tell me any story they wish to. I want to try to interrogate that. But why did yields rise, let's say, since the last FOMC meeting till this?

I'll give you three reasons, but I would say these things tend to be overdetermined. This is a complicated set of things that are affecting, the most important asset anywhere in the world, the 10-year Treasury. It's the risk-free asset upon which every price, virtually every asset in the world, is related to. So I'll say three things. First, is economic strength. I think part of the reason why we've seen over the course of 2026, long-term yields go up, is the economy is strengthened. Second reason, competition for capital.

The surge in capital expenditures, which I referenced in my remarks, is real. And the so-called hyperscalers are out of the market raising funding. And so the competition for capital is real. And I think it partly explains the increase in yields. The third is geopolitics. The situation in hotspots around the world are driving long-term yields. It's not simply spot prices of energy or spot prices. for corn or soybeans or wheat. But it's the difference between those spot prices and so-called

crack spreads, what that means for products that find their way into stores across the country. I think those are the three leading explanations, but certainly not an exclusive list. Michael McKee from Bloomberg Radio and Television. You said in Jackson Hole that you want to see inflation come down clearly and at sufficient speed, which is a standard without necessarily a measurable threshold. And the reason I ask is because today you say today's policy action will support a timelier return to the committee's 2% target. And yet in the summary of economic projections, the median pushes the 2% target achievement out to

2009 another two years. And I'm wondering how you can square those two things. One easy way to square that, Mike, is those aren't my forecasts. Those are the forecasts of my 18 colleagues, and I tried to represent them dutifully to you. My business is to not give forward guidance, but my commitment in June was to reaffirm to the American people, to anyone listening, that we will deliver price stability. My commitment in July was to say, we want to buy a little bit of time. We want to evaluate what's happening across a range of dimensions. And what I said in Jackson Hole in August is we're committed to a discipline, not to a decision.

Today's action starts to show we're serious about this. And we will deliver on the price stability objective. And as the statement said, we'll do it on a timelier basis. That's our decision. And when we continue our discussions over the course of the next next year, we'll do it on a timely or several weeks and months. We'll have more to say about it, but I'm ill-prepared to prejudge those future actions. Thanks, Chairman Warsh. Matt Eagum and CNN. You've spoken in the past about the positives

that could come from widespread adoption of artificial intelligence. How concerned are you, if at all, about these increasingly alarming warnings we've heard from AI leaders about losing control of this powerful technology and doing real-world damage, damage that would presumably impact the real economy? So I've spent a lot of time thinking about AI, and before I found my way to this post, I spent a lot of time talking about it publicly. Independence of the Federal Reserve is about staying in our lane. We care very much about what's happening in artificial intelligence. We care much about the implications on the demand side of the economy and ultimately on the supply side of the economy.

I care so much, I think it's so important, that we establish a task force that should report. by the end of the year to help us think about the implications for our future policy conjuncture, but the policy decisions that are made about the risks and rewards, the challenges and opportunities, those are decisions made by other parts of the government. I'm going to leave it to them to make those political decisions, those policy decisions. The implications, those decisions obviously have some bearing on our day job, and that's where we'll be focused. Thank you, Mr. Chairman. Jennifer Sean Berger with Yahoo Finance. Inflation has run up mostly from higher energy prices and tariffs, which some say are supply shocks that rate hikes

cannot fix and should feign on their own so long as inflation expectations stay anchored. And now that you have hiked rates, do you need to push growth below potential unintentionally pushing weakness on the job market to bring inflation down? And how do those dynamics play out, given the forcefulness with which AI is driving the economy right now? So there's a lot there, Jennifer. Let me see if I can. can't do just a little bit of it. First, we believe that the unemployment rate is basically running consistent with full employment. I don't believe that we need to do harm to the labor markets to achieve our objective.

I don't believe that the two parts of our mandate, price stability and full employment, are working at cross-purposes over the medium term. So economic growth, that is, in short, continuous, sustainable, durable economic growth. That's the business we're in. And the job we did today, the job will continue to do, is to ensure price stability, which can mean that sustainable, durable, economic growth

can go on for longer. The economy can be stronger, and as I mentioned before, the least well-off can get the benefits of it.