The Fed Announces
The Federal Open Market Committee announcement:
The bond market announcement:
Daily Treasury Par Yield Curve Rates
This is the first FOMC meeting in a long time truly worth paying attention to. For years the Fed has made it a top priority to tip its policy decisions in advance and avoid surprising markets. New Fed Chair Kevin Warsh has said he doesn’t support that.
As I’ve long maintained, it’s logically inconsistent to both adhere to a predetermined policy path and respond to the data; either leaving forward guidance without credibility or sacrificing data dependence.
Another less recognized flaw of the Fed’s “forward guidance” policy: It facilitates making policy FOMC on predictions instead of actual data. This way the Fed can base its policy on whatever it wants to, and then craft a forecast to suit. One can legitimately wonder whether Powell et al put off the hard part and dumped this mess into his successor’s lap, or into this mid-term election year. It’s either something like that or it’s just a truly abysmal forecaster.
No concrete change in policy, as expected. Warsh wouldn’t have wanted fireworks for his first meeting anyway. There were a few conspicuous changes. The vote was unanimous. The statement was brief. The dot plot didn’t disappear, but some of the dots did, indicate that a few, including Chairman Warsh, didn’t enter one.
Markets are initially taking the announcement as a whole as hawkish, with stocks, bonds, gold and other commodities all down in terms of dollars, which is just a complicated way of saying the dollar is up versus most other assets.
How could anything but hawkish be appropriate? The CPI at last check was up over 4% since a year before. The stock market is in a bubble and there’s a circus atmosphere of speculation all around. Monetary policy has been rampant.
The press conference having just wrapped up, the overarching message from Warsh was a renewed commitment to price stability. Markets appear to be taking him at his word. The Warsh Fed is off to a good start stepping up its credibility.
A note of great interest to me was that he cited financial markets as a source of real time inflation information. Having spent years pounding the table on that exact point, as big a stretch as it would be to declare the new Fed Chairman a Financology acolyte, I do sometimes wonder who might be among its silent lurkers…
“Enter Kevin Warsh’s first press conference as Fed Chair with inflation running completely out of control. My friend GoJo makes the … err … bold claim that the Fed is not tweaking it’s post-2008 playbook…not adjusting it around the margins … breaking with it.”
“Johnson’s central argument is that Kevin Warsh’s first meeting as Fed Chair represented a repudiation of the Bernanke-Powell era and a return to a much older conception of central banking…one where the Fed’s primary job is delivering price stability, not reassuring investors, supporting asset prices, or providing a detailed roadmap for every future policy move.”
“History is fairly clear on that point, which is why so many people celebrate Volcker today while simultaneously advocating policies that would make a genuine Volcker-style campaign impossible. Everyone loves inflation fighters in retrospect. Very few people are willing to tolerate the economic pain required to actually defeat inflation in real time.”
“Warsh personally declined to participate in the Summary of Economic Projections (SEP). This tells us two things: Warsh does not consider SEP important and he will probably get rid of the “dots” in the near future. Good riddance.”
““The Fed statement says that inflation is primarily determined by monetary policy. You bet it is. I’ve said for years inflation is a choice. You bet it is. And today I’m announcing that this Committee unambiguously and unanimously have decided we are going to deliver on that.””
It’s a choice for sure; the Fed can choose whether to create inflation and how much.
“If the Fed is concerned about validating market expectations, it cannot be guided by its best assessment of the economic data.”
That has a familiar ring to it. But this is the first time I’ve heard it outside of Financology:
FOMC 2026 0128:
“Take your pick … make a meaningful commitment to future policy and ignore the data or be data dependent and make meaningless noise.”
“Chair Warsh made clear from the start of today’s press conference that change is in the air. He highlighted the more succinct FOMC statement and announced that he was the member who did not provide forecasts in the summary of economic projections because he doesn’t believe in the value of forward guidance. He could have stopped there and left reporters with plenty to write about and debate, but he was just getting started.”
1926-2026
https://www.zerohedge.com/news/2026-06-26/kevin-warsh-just-took-30-years-fed-culture-wood-chipper
So, what are we looking at?
Strong $ policy?
Short answer: Yes.
Caveats: Dollar policy is officially the purview not of the Fed, but of the Treasury. But the dollar is a security issued by the Fed, and in reality it controls its value. Yet the Treasury’s monster debt will put enormous pressure on the Fed to debase and dilute – weaken – the dollar. So rock meet hard place. For the time being, this means strong dollar, but unless there is a watershed change in fiscal direction, weak dollar forces will ultimately prevail.
Last Stand?
Gold?
This is one thing I’m looking at. It is stocks (VT) as priced in gold (IAU).
Notice how stocks got cheap relative to gold into late 2026 Q1. Or looked at the other way around, gold got pricey relative to stocks. This relationship has almost reverted to the mean, suggesting that most of the water is under the bridge. I also do a similar analysis relative to other metals but haven’t updated it since January.
Bear in mind that neither of these speaks to gold in terms of dollars, so has no direct bearing on the gold prices we see cited daily. But since dollars are only one of several portfolio alternatives to gold, it’s still useful when it comes to making allocation decisions.
New Fed Chair Kevin Warsh Says There’s a Huge Problem With Financial Markets
“”Financial market prices are probably the most important source of information to guide central bankers,” Warsh said at the press conference. “But when all the financial markets are doing is reflecting back what we’ve said, then we’re taking the most important source of information and we’re being blind to it.””
FOMC 2026 0429
“Readers know that I’ve long maintained that the huge rise in asset prices over recent years represents rampant inflation. The possible outcomes were limited; either asset prices come back down or consumer prices rise to meet them. Or some messy combination of both…
… Ripping asset prices are the first signs of inflation and currency debasement; once this has happened stopping it is like trying to stuff the toothpaste back into the tube.”
The Claw Machine
“But changes in purchasing power that are ultimately reflected in consumer prices occur in asset markets first. If the prices of non-cash assets surge and are not reversed, cash has lost purchasing power and it’s only a matter of time before that loss is reflected in consumer prices…
… And this, dear readers, is why the Fed is perpetually behind the curve. It is following lagging indicators. It dismisses asset prices as irrelevant to inflation.”
Maybe not any more?
Every little helps
JUST IN: 🇯��🇮🇳 In a direct hit to the US dollar, Japan and India are considering direct trading in national currencies, yen-rupee settlements, per Nikke
Central banks think the US has become riskier. They plan to sell dollars and buy gold
Hmmm … no mention of the US seizing of Russian assets. Guess that would have been too much to expect from CNN.
Would you park your savings with an entity that might decide to confiscate them?
As I have been saying for weeks, gold under $4000 looks like a bargain. We can’t know whether it gets cheaper first, but it’s likely to be a lot less cheap in five or ten years.
The same can’t be said of US supercap stocks.
In just 6 words, Fed chair Kevin Warsh took away Wall Street’s radar — and now investors are flying blind
“You might have already noticed something: a difference in today’s policy statement. It’s a bit shorter, a bit simpler — and it dispenses with some older language. That statement just gives you the facts, as best we can judge it. Absent, also, is so-called forward guidance.”
Wall Street is crying in its beer because the Fed has taken a step towards independence from it. It’s been railing for months about “Fed independence”, but only from the White House … what it really feared was the competition.
“In theory, this is going to make it considerably more challenging for Wall Street and the bond market to figure out what, if any, changes the FOMC will make to monetary policy. Volatility in the bond market could be particularly consequential, with higher yields (and therefore higher lending rates) being the result … The transparency and predictability that have historically gone hand in hand with FOMC meetings are now gone.”
So this proves a contention I’ve been making since the days of iTulip; “transparency” was a euphemism for predictability, in fact a form of monetary ease. The Fed is just as transparent as ever; it’s predictability that has decreased. With greater confidence in future policy, high finance could lever up more … a transfer of wealth from Main Street to Wall Street. These higher bond yields reflect an effectively higher rate policy.
Is the Federal Reserve Quietly Fueling a Bubble? U.S. Money Supply Just Hit $22.7 Trillion
This article is a few weeks old, but it’s for the historical perspective.