Fed Hawkish Shift and Consumer Strength (with Tom Keene, Paul Sweeney)

Aditya Bhave argues the Fed is offside with policy 75bps easier than a year ago despite unchanged unemployment and sticky core inflation. He expects the Fed to reverse last year's risk-management cuts with three rate hikes. The consumer is strong, supply-driven inflation is persistent, and equities can handle further hikes. AI will replace tasks, not jobs, but transition speed matters for policy.

Yields up , short term, interviewee explicit

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NDX cautious up , short term, interviewee implicit

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Bank of America 8.8
Investment Bank $3040.00B
Aditya Bhave 8.5

Fed Hawkish Shift and Consumer Strength (with Tom Keene, Paul Sweeney)

ndx

Equities have handled a shift from cuts to hikes well; another hike and a half likely won't break the market.

yields

The Fed will hike three times, reversing last year's cuts.

16 calls

-1

no reliable edge (random outcomes)

4/17/2026 10:15:26 PM	short term down	7 days later	+2.02%	-2.02%
3/20/2026 4:47:05 PM	medium term cautious down	21 days later	-0.85%	+0.43%
3/19/2026 9:36:59 PM	medium term cautious down	20 days later	-2.23%	+1.12%
2/17/2026 12:42:30 PM	short term cautious down	5 days later	-1.23%	+0.61%
12/12/2025 2:11:07 PM	short term down	7 days later	-0.31%	+0.31%
12/5/2025 12:40:03 PM	medium term cautious down	21 days later	-1.34%	+0.67%
12/1/2025 6:33:31 PM	short term cautious down	6 days later	+2.10%	-1.05%
11/13/2025 8:45:37 PM	medium term cautious down	20 days later	-0.96%	+0.48%
10/29/2025 1:10:31 PM	short term cautious down	5 days later	-0.10%	+0.05%
10/15/2025 6:53:52 PM	medium term cautious down	20 days later	+4.55%	-2.28%
9/18/2025 10:17:17 AM	short term cautious down	5 days later	+0.19%	-0.10%
9/17/2025 6:36:22 PM	short term cautious up	5 days later	+0.39%	+0.19%
9/17/2025 4:38:45 PM	medium term cautious down	20 days later	+0.61%	-0.30%
9/5/2025 10:40:41 PM	medium term cautious down	21 days later	+2.35%	-1.17%
9/3/2025 5:31:38 PM	medium term sharp down	20 days later	-0.69%	+1.04%
8/14/2025 9:14:07 PM	short term cautious down	5 days later	-0.74%	+0.37%

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Introduces the interview focusing on the Fed and Kevin Warsh's potential actions, referencing Robert Frost.

Tom Keene
Aditya Bhave

The Fed is offside: unemployment unchanged, core PCE inflation 60bps above last year, yet policy is 75bps easier. Expects three rate hikes to reverse last year's risk-management cuts.

Nine FOMC members expect to hike despite no forecast for falling unemployment, indicating a hawkish shift.
Questions the nonlinear nature of three rate hikes.

Tom Keene
Aditya Bhave

75bps is normal for a mini-cycle; underlying inflation is ~2.8%, not 3.5%, so rates don't need to go to 5%.

Taylor rule at 3.5% core PCE would imply 5% rates, but that's not the call.
Asks about consumer health.

Paul Sweeney
Aditya Bhave

Consumer is doing great: Bank of America data shows acceleration in spending ex-gas, with no clear downside risks to activity.

Some boost from World Cup may roll off, but no sign of weakness.
Raises political pressure on the Fed to lower rates and social media backlash from hikes.

Paul Sweeney
Aditya Bhave

Chair Warsh has a brief window to hike without blame since inflation occurred under the previous regime; if he doesn't hike now and inflation persists, he'll own it next year.

President noted he'd be okay with the Fed hiking rates.
Asks if deglobalization and near-shoring structurally lift inflation.

Paul Sweeney
Aditya Bhave

Yes, supply drivers are very sticky and not going away; wave after wave of supply shock means the Fed must either suppress demand or accept missing its target by 50-70bps for 5-10 years.

No disastrous demand problem, so policy doesn't need to go to 5-6%.
Asks what the stock market does with three rate hikes.

Tom Keene
Aditya Bhave

Equities will likely be fine; they've already navigated a shift from two cuts priced to a hike and a half. Another hike and a half might not break the camel's back.
Asks about AI's impact on the labor market intermediate to long term.

Paul Sweeney
Aditya Bhave

AI will replace tasks more than jobs, creating new jobs we can't conceive of now (60% of today's jobs didn't exist in 1940). Transition speed matters for near-term Fed policy.

There will be winners and losers during the transition.

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