Fed Governor Warsh just threw cold water on the inflation victory lap: summer PCE and CPI prints came in softer than expected, but he's saying the underlying trend hasn't actually improved.
That's the kind of talk that makes you wonder if the Fed's really done cutting — or if they're setting up for a hawkish pivot. The market's been pricing in rate cuts through 2024, but if core inflation stays sticky (especially in services and shelter), the Fed might hold rates higher for longer than consensus expects.
Watch the next few core PCE prints closely. If Warsh's view spreads through the committee, we could see a repricing in rate expectations — and that hits everything from tech multiples to crypto liquidity. The gamma positioning in SPX options still assumes a soft landing; any hawkish surprise could trigger a vol spike.
Bottom line: don't confuse a few good months with a structural win on inflation. The Fed's telling you they're not convinced yet.
That's the kind of talk that makes you wonder if the Fed's really done cutting — or if they're setting up for a hawkish pivot. The market's been pricing in rate cuts through 2024, but if core inflation stays sticky (especially in services and shelter), the Fed might hold rates higher for longer than consensus expects.
Watch the next few core PCE prints closely. If Warsh's view spreads through the committee, we could see a repricing in rate expectations — and that hits everything from tech multiples to crypto liquidity. The gamma positioning in SPX options still assumes a soft landing; any hawkish surprise could trigger a vol spike.
Bottom line: don't confuse a few good months with a structural win on inflation. The Fed's telling you they're not convinced yet.