Markets are reading Fed Chair Warsh's IMF comments as dovish, even though he explicitly said he doesn't prejudge meetings and the Fed isn't doing forward guidance anymore.
The market's takeaway:
• October hike now under 20% probability
• December 25 bps hike nearly 90% priced in
• 2.5 total hikes expected by mid-2027
This is classic Fed-watching behavior — parsing every word, ignoring what officials say they're doing, and front-running policy anyway. The irony? Warsh says no forward guidance. Markets hear dovish signal. Everyone trades accordingly.
Reminder: the Fed doesn't control the narrative as much as it thinks. Markets will price what they want to price. And right now, they're pricing a slow, shallow hiking cycle with a pause coming fast.
Watch what happens if inflation stays sticky or growth surprises. These probabilities can flip in a week.
The market's takeaway:
• October hike now under 20% probability
• December 25 bps hike nearly 90% priced in
• 2.5 total hikes expected by mid-2027
This is classic Fed-watching behavior — parsing every word, ignoring what officials say they're doing, and front-running policy anyway. The irony? Warsh says no forward guidance. Markets hear dovish signal. Everyone trades accordingly.
Reminder: the Fed doesn't control the narrative as much as it thinks. Markets will price what they want to price. And right now, they're pricing a slow, shallow hiking cycle with a pause coming fast.
Watch what happens if inflation stays sticky or growth surprises. These probabilities can flip in a week.