Fed hawks Warsh incoming Chair; possible July hike, zero cuts through 2027 sticky inflation
Key Questions
Who is the new Fed Chair and what is notable about their confirmation?
Kevin Warsh was sworn in as Fed Chair with the lowest Senate votes ever recorded. His preferred inflation measure, the trimmed mean PCE, remains above 2%, supporting a hawkish stance.
What are the latest expectations for Fed rate cuts through 2027?
Analysts from Nomura and Waller have dropped 2026 cut calls, with bonds pricing in higher-for-longer rates and over 58% odds of a July hike. Zero cuts are now expected through 2027 amid sticky inflation.
How is AI contributing to inflationary pressures according to Apollo's economist?
Torsten Slok of Apollo notes that the AI build-out is inflationary and will delay rate cuts, challenging prior dovish market expectations.
What do recent inflation readings show for April?
April CPI came in at 3.8%, with PCE expected at 4.06%. Tariff-driven inflation is also trapping mortgage rates, limiting the Fed's ability to ease policy.
What did multiple Fed officials say about current policy and rate hikes?
Officials including Cook (prepared to raise rates), Jefferson (policy well positioned), and Williams (reiterates stance) have all sounded hawkish. Powell warned that politicizing the Fed would erode public trust.
Why is the May jobs report important this week?
The May jobs report is a key data point that will shape rate expectations amid ongoing inflation risks and hawkish Fed signals.
What does the latest JOLTS report indicate about the labor market?
JOLTS unexpectedly spiked to a 23-month high, reinforcing the Fed's hawkish position and supporting higher-for-longer rates.
How do tariffs affect mortgage rates in this environment?
Tariff-driven inflation is trapping mortgage rates at elevated levels, and the Fed cannot address this through rate cuts without risking further price pressures.
Warsh sworn in as Fed Chair with lowest Senate votes ever. Apollo's Torsten Slok says AI build-out is inflationary and will delay rate cuts, challenging dovish expectations. Nomura/Waller drop 2026 cut calls, bonds price higher-for-longer (58%+ hike odds). April CPI 3.8%, PCE expected 4.06%. Multiple Fed officials hawkish: Cook prepared to raise rates, Jefferson says policy well positioned, Williams reiterates. Powell warned politicizing Fed would cost public trust. May jobs report this week key for rate expectations. **New: JOLTS unexpectedly spiked to a 23-month high, reinforcing hawkish Fed stance. Tariff-driven inflation is trapping mortgage rates, and the Fed can't fix it with rate cuts. Warsh's favored inflation measure (trimmed mean PCE) still above 2%, supporting no cuts.