According to BlockBeats, on September 17, the Federal Reserve's FOMC unanimously decided to raise interest rates by 25 basis points, increasing the target range for the federal funds rate to 3.75%–4%, marking the first rate hike since July 2023. The latest dot plot shows that 16 officials expect at least one more rate hike in 2026, with median expectations of 4.1% for both 2027 and 2026.

Federal Reserve Chairman Warsh stated that recent data shows the U.S. economy is performing strongly and the labor market remains resilient, but inflation is too high and has persisted for too long. The FOMC is not currently confident that inflation is moving toward its 2% target. He said the main problem for the economy right now is not growth, but inflation.

Warsh also stated that the rise in US Treasury yields was primarily driven by three factors: a strong US economy, increased competition for capital, and geopolitical factors. He did not directly mention the US-Iran conflict, but had previously indicated that geopolitical changes prompted the Federal Reserve to reassess the economic outlook.

The market quickly shifted to more hawkish pricing. Between the announcement of the decision and Warsh's press conference, spot gold fell by about $100, the dollar index rose by about 40 points and broke through the 100 mark, the 2-year US Treasury yield rose by about 10 basis points, the 10-year yield rose by about 5 basis points, and US stocks turned negative across the board.

Interest rate futures are currently pricing in an additional 33 basis points of interest rate hikes this year, up about 6 basis points from before the meeting, and expect a cumulative total of about 75 basis points of rate hikes by June next year, or three 25 basis point rate hikes.

According to BlockBeats, on September 17th, Justin Greenhill, Chief Investment Officer of SOLLINDA Capital Management, stated: "The signals from the Warsh press conference were clearly hawkish, which we believe may help alleviate the recent upward trend in long-term bond yields, at least in the short term."

It remains unclear how this will affect the stock market, but we expect small-cap stocks to underperform large-cap stocks as financial conditions tighten further. (Jinshi)

According to BlockBeats, on September 17th, based on publicly available market data, two months before the 2024 presidential election, the Federal Reserve, led by Powell, cut interest rates by 50 basis points while core CPI remained as high as 3.3%; two years later, with only two months left until the 2026 midterm elections, the Federal Reserve, led by Warsh, raised interest rates by 25 basis points while core CPI fell to 2.4%.

Both periods are crucial before the election, yet the Federal Reserve's policy direction under Powell and Warsh has seen a dramatic reversal. This contrast is particularly intriguing. Trump had previously advocated for lower interest rates and selected Warsh as Fed Chairman, which the market initially saw as a key personnel move to push for rate cuts. However, Warsh's first interest rate decision after taking office was a rate hike.

Warsh cited reasons including a strong U.S. economy, persistently high inflation, and geopolitical shifts. Among these, the U.S. strike on Iran and the resulting energy and geopolitical risks were also factors in the Federal Reserve's reassessment of the economic outlook.