Stephanie Roth on credible Fed and two paths to 2% inflation (with Scarlet Fu; Lisa Abramowicz; Jonathan Ferro)

Stephanie Roth sees Warsh as credible and independent, not bowing to political pressure. She notes half the FOMC wants to hike, raising odds of a near-term hike. She sees two paths to 2% inflation: time (shocks fade) or rate hikes. Either way, the Fed is committed.

explicit

NDX

Oil

Metals

USD

Wolfe Research 4.8
Financial Media
Stephanie Roth 8.0

Stephanie Roth on credible Fed and two paths to 2% inflation (with Scarlet Fu; Lisa Abramowicz; Jonathan Ferro)

rut

Higher rates and hawkish Fed are negative for small caps that rely on borrowing, consistent with Roth's view that policy is tightening.

yields

Short end of the curve rates are up significantly. Odds of a near-term hike have risen substantially.

Stephanie Roth

Warsh is setting up to be a very credible Fed. He's smart about getting consensus. He was not in favor of a hike today, but that could change with data. More hawkish than some expected.

Some thought he'd push through rate cuts for the president, but he didn't.
Stephanie Roth

This silences critics who thought we wouldn't have an independent Fed under Warsh. He's looking at data, not scared to hike if needed. Markets should want an independent Fed.

Pushing through cuts to appease the president wouldn't be good for markets.
Stephanie Roth

Half the FOMC is now interested in hiking rates. Odds of a near-term hike have risen substantially. Before the meeting, expectations were 3-6 members; now it's about half the committee.

Short end of the curve is up significantly.
Stephanie Roth

Warsh's comment that policy is 'uneven' could initially sound dovish, but he clarified it's only restrictive in housing. Outside housing, the economy is running hot. That's a hawkish comment.
Stephanie Roth

Warsh's message was credible and he delivered exactly what he planned. He wasn't concerned about initial market moves — he knew he was delivering a balanced but somewhat hawkish message.
Stephanie Roth

This should pull down long-term inflation expectations. The Fed is credible on getting inflation down. There are two paths: time (shocks fade) or rate hikes. Either way, the end goal is 2%.

Warsh made that very clear.

SignalTube

markets at a glance