Kevin Warsh, President Donald Trump’s selected choice for Federal Reserve chair, has overseen the implementation of an interest rate increase, defying intense pressure from the White House. This marks the first time rates have been raised since July 2023.
In analysis of the decision, Kay Haigh, the global head and chief investment officer of Fixed Income and Liquidity Solutions at Goldman Sachs Asset Management, noted that the Federal Reserve signaled it does not currently anticipate an aggressive tightening cycle.
According to the Summary of Economic Projections (SEP), most Federal Open Market Committee (FOMC) members expect a total of two rate hikes this year. Haigh suggested that the Fed will likely skip its October meeting due to its proximity to the midterm elections.
The firm’s base case predicts one additional rate increase in December, although this remains dependent on upcoming Consumer Price Index (CPI) reports and the trajectory of energy prices.
Two hikes this year sounds like a plan, but energy prices are so unpredictable right now. Hard to trust the models.
Skipping the October meeting makes sense politically, but I hope that doesn’t just kick the can down the road.
Wait, does this mean the Fed isn’t going aggressive? I was worried about a rocky path ahead for inflation.
Warsh standing his ground against the White House is exactly what independent central banking should look like.