【Key Takeaways from the Fed FOMC Statement and Warsh Press Conference】

FOMC Statement:
1. Statement overview: The Fed unanimously approved a 25-basis-point rate hike to a range of 3.75%–4%, marking the first rate hike since July 2023.
2. Economic outlook: Economic activity is expanding at a solid pace. Although uncertainty remains elevated, partly due to geopolitical conditions, domestic spending remains resilient. Productivity growth is strong, and capital investment is solid. Employment growth is keeping pace with the expansion of the labor force, while the unemployment rate has changed little. Economic growth forecasts for this year and next year were raised.
3. Inflation outlook: Inflation remains elevated. Today’s policy action will support a more timely return of inflation to the 2% target. This year’s inflation forecast was raised, with inflation expected to return to 2% in 2029.
4. Rate path: The dot plot shows that 16 officials expect at least one more rate hike in 2026, while the median dot-plot projections for 2027 and 2026 are both 4.1%.
Warsh Press Conference:
1. Rate outlook: He believes financial conditions are not restrictive, a view that is widely shared within the FOMC. Some accommodative policies have been removed, bringing financial and credit conditions closer to target. He will not provide forward guidance and did not provide a dot plot. Policy is not being driven by the market. He does not believe the labor market must be harmed to achieve the goal.
2. Inflation outlook: The primary focus is inflation, which is too high and has persisted for too long. Prices in too many categories have risen by more than 3% over both six-month and 12-month periods. The FOMC is not convinced that inflation is moving toward the target level. It will ensure that any price changes do not spread.
3. Economic outlook: The economy is resilient. The Fed is playing a role in maintaining the current economic progress. Underlying economic growth is higher; the problem is inflation. The unemployment rate remains low, essentially reaching full employment.
4. U.S. Treasury issue: He believes there are three reasons for rising bond yields: first, a strong economy; second, competition for capital; and third, geopolitics.
5. Artificial intelligence: Decisions regarding the risks and rewards should be made by other policymakers. The working group should submit a report on AI to us by the end of the year. He is concerned about AI’s development and its impact on demand and supply.
6. Other issues: He declined to comment on whether the matter had been discussed with Trump; the press conference was shortened to about 30 minutes; the White House expressed regret over the rate hike; as of press time, Trump had not commented on the rate hike.
7. Market reaction: From the announcement of the decision until the Warsh press conference, spot gold continued to fall by about $100, the dollar rose 40 points and broke above 100, the U.S. 2-year Treasury yield rose 10BP, the 10-year yield rose about 5BP, and U.S. stocks fell across the board. Interest-rate futures priced in about 33BP of additional hikes this year, up about 6BP from before the meeting; by June next year, they priced in three additional hikes, or 75BP. $BTC $ETH