Kevin Warsh presided over his first presidency Federal Open Market Committee (FOMC) convened this week as Chairman, by the decision of the US Federal Reserve To keep rates constant. This came as no surprise to most market observers.
The big question now is what will happen at the next FOMC meeting, which is just six weeks from now. With a deal (or lack thereof) on the way with Iran and gas prices falling, perhaps sticky inflation will lose its appeal. Employment remains strong.
Iggy Ioppe, previously Credit Suisse and now at CIO TheoHe believes the Fed’s next move will be to raise interest rates. He is not alone in his expectation
“The hold itself has never been questioned. What’s important is that Warsh used his first meeting to reduce the easing bias, which is consistent with what the data has been telling us for weeks,” Ioppe said. “Inflation is still at a three-year high and payrolls are coming in hot with over ½ million jobs created in the last 3 months. There is no version of the Fed cutting in the next few months, but they are not increasing every day, they are actually easing.”
Ioppe is optimistic that the Iran deal will help the Fed and remove the irritating variable in its interest rate decision as oil falls to $80. He believes this allowed Warsh to remain stationary without sounding the alarm.
“It doesn’t bring interest rate cuts any closer because core inflation was high before the war and remains high after the war.”
Gold’s record rally has already receded a bit as the cost of holding the asset gives you nothing. A peace agreement removes some of the political premium and the momentum of trade is now broken. The situation for gold is now changing from price to return.
For BitcoinIoppe said the recovery in the Iran deal is more about positioning and risk appetite.
“With the liquidity cap closed by the Fed, which has stopped talking about cuts, it is trading on flows and fundamentals rather than any new dovish impulse.”
