Federal Reserve Chairman Kevin Warsh held a press conference Wednesday following an FOMC meeting that voted 9-3 to leave interest rates unchanged at 3.5-3.75%. Markets reacted sharply: the 30-year Treasury yield hit its highest level since 2007, while the probability of rates remaining unchanged at the next meeting jumped by 20 percentage points to 45%. Warsh ended the practice of forward guidance and was vague about what conditions would prompt him to raise rates, leaving economists puzzled and raising questions about his credibility. Inflation has remained above the Fed’s 2% target for at least 63 months, with PCE currently at 4.1%. Three FOMC members dissented from the decision, suggesting growing disagreement within the committee.
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