Facet’s CIO Tom Graff Quoted by Reuters on Federal Reserve Interest Rate Decision
Reuters featured Facet’s Tom Graff, CFA, to evaluate market reaction and policy signals following the Federal Reserve’s latest rate pause.
As expected, the Fed held rates at this meeting, setting up what is likely to be a hike in December. I believe this was a mistake: the Fed should have hiked today. Because Warsh decided to eschew forward guidance, his actions have to do all the talking. Another Fed Chair could have passed on a hike this meeting and still shown resolve to fight inflation by promising hikes down the road. Warsh has ceded that option.
That means he needs to act sooner rather than later. Inflation remains high, without any obvious sign it’s subsiding, and I don’t think the recent spike in diesel prices has fully flowed into consumer inflation yet. If inflation is too high, what is the benefit of waiting? There isn’t any material difference between hiking now and hiking in December, especially since a December hike is fully priced in. Hiking today would have bolstered Warsh’s credibility as an inflation fighter. By waiting, he risks coming off as hesitant, or worse, complacent.