Federal Reserve Chair Warsh said the market had already done much of the tightening work since the Fed’s June meeting, pushing back on any description of the latest decision to keep rates unchanged as a “pause.” Speaking on July 30, Warsh said he would not call the decision a pause “in any sense,” adding that if the label must be used, market moves since mid-June point in the opposite direction.
According to the report cited by BlockBeats, yields on both the 2-year and 10-year U.S. Treasury notes have risen by about 20 basis points since the Fed’s mid-June policy meeting. Warsh said financial markets had not paused their adjustment during that stretch. Instead, they kept repricing based on incoming inflation data and the strength of economic growth.
He said inflation figures affected market expectations, while resilient growth pushed both nominal and real interest rates higher. Warsh added that although the Fed did not explicitly change its policy rate at this meeting, that should be seen as the beginning of the broader policy story rather than the end.
Federal Reserve Chair Warsh said on July 30 that financial markets have already delivered much of the effect of the Fed’s tightening since the June meeting, and he rejected describing the latest decision to leave rates unchanged as a “pause.”
“I would not call today’s decision a ‘pause’ in any sense,” Warsh said. “If one insists on putting the ‘pause’ label on it, then the behavior of financial markets argues for the opposite.”
Since the Fed’s mid-June policy meeting, yields on both the 2-year and 10-year U.S. Treasury notes have risen by about 20 basis points.
Warsh said financial markets did not “pause” their adjustment over that period. They continued to reprice in response to inflation data and economic growth. On one side, inflation readings shaped market expectations. On the other, strong economic growth pushed both nominal and real rates higher.
He added: “It is true that the Federal Reserve did not explicitly change the policy rate today. But in my view, this is the beginning of the broader policy story, not the end.”
The report was cited by BlockBeats and attributed to Jin10.
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