It has been a busy week here on Wall Street. The Fed has spoken, raising interest rates by a quarter percentage point and pencilling in an additional hike later in the year. It comes against a backdrop of a ten-year Treasury yield touching its highest level since 2007 and oil pushing back above $105 a barrel on the Iran conflict. Joining me is Eric Criscuolo, NYSE Market Strategist. Eric, thanks for joining us.
Good to be here, Johnny.
The Fed raised rates. Was it in line with what you expected and did anything in the statement catch you off guard?
It was very well telegraphed from the market — about a 90% chance going in that they would raise, which they did. The unanimous decision was a little surprising — nobody dissented to hold rates. Chair Warsh kept to his knitting and basically did a lot of not saying a lot. No forward guidance, would not commit to any move after this one. But the focus throughout the Q&A was all about inflation — getting the target back toward 2% at a quicker rate. They took it up 25 basis points this meeting, and it seems like they are going to take it up at least one more time before year end. Then 2027 looks like one or two more hikes. Higher for longer — maybe even higher than before for longer. That is why rates jumped yesterday after the meeting and the S&P pulled back.
President Trump pushed back on the decision. How did the market take those comments?
Markets have been hit over the head many times with President Trump saying the Fed has to cut rates — we saw it throughout Chair Powell's tenure as well. Markets just kind of expected it and moved on. What will be interesting is if they hike at the next meeting in late October, because that is right before the midterm elections. It could get very political. That is something to watch for the next meeting.
Is there any hope for a rate cut in the near term?
Oil is driving basically all of this. All these inflation metrics — if you look at core inflation, they try to strip out energy. You really cannot do that because oil just flows through the entire economy. As long as oil stays elevated due to the Iran conflict, inflation pressure does not go away. And the fed will have a harder time cutting rates if that persists.
Thank you so much, Eric.
Thank you for having me.
