Core PCE was tracking about 0.23% for August on Wolfe Research's numbers — a print the Fed's own officials have described as low enough to sit still. The Fed raised rates 25 basis points anyway.
Stephanie Roth's explanation is that the market, not the data, set the outcome. Neil Dutta's is that the hike was the coherent part of the afternoon and the Fed's forecasts were not.
"The market took them there. The market wanted them to hike, and they had to deliver it."
Roth is Wolfe Research's Chief Economist and Dutta runs economic research at Renaissance Macro; they were on the desk together as the S&P 500 fell through the close and the two-year yield reached its highest level since July 2024.
The full segment is covered here so you can skip it. 35 minutes of audio, 15 minutes of reading.
Here are the 10 calls that matter.
👤 Guests: Stephanie Roth, Chief Economist at Wolfe Research, and Neil Dutta, Head of Economic Research at Renaissance Macro Research
🎙️ Hosts: Jonathan Ferro and Lisa Abramowicz, who anchor Bloomberg Surveillance, with a third anchor at the table
👥 Also on: Mike McKee, Bloomberg's economics and policy correspondent, reporting from inside the news conference, and Bloomberg's Balance of Power anchor in Washington
📰 Published: 16 September 2026 on the Bloomberg Surveillance feed
🟣 Apple Podcasts | ⏱️ 35 min | ✅ Time saved: 20 min
Key Takeaways
Roth called it a credibility hike the data would have let the Fed skip
Core PCE was tracking about 0.23% for August, which she said was in the range officials had called holdable
The median neutral-rate dot rose to 3.2% from 3.1%, after 3% last year
The 10-year Treasury real rate is now at roughly an 18-year high
Dutta thinks more than one further hike is coming, and that it is bad for equities
A few weeks ago, he noted, some forecasters thought the next move would be a cut
His sharper charge is that Warsh is not the incoherent part — the Fed's projections are
The three things driving above-trend inflation are all outside the Fed's reach
The war, the chip shortage and tariffs, and Roth expects the tariff contribution to roll off
Warsh has given the market a reaction function: the share of inflation categories printing above 3%
The curve flattened and the banks sold off, which the anchors read as the first growth scare of the year
The news conference ran 30 minutes, with no follow-up questions allowed and a redrawn seating chart
The White House called the hike unfortunate while saying the president still respects Fed independence
1. A Hawkish 25bps
The programme opened minutes after the news conference ended, with the decision and the price action.
The Fed raised rates 25 basis points, and its own forecast implies one more this year with a lean toward more in 2027.
The tape the programme played first was the line the market traded on. Warsh, at the news conference: "Today's action starts to show we're serious about this. And we will deliver on the price stability objectives. And as the statement said, we'll do it on a timelier basis."
Equities fell on the opening statement rather than on the decision. Ferro described "A hawkish opening statement from a Fed chairman happened to drive equities lower down on the session by 0.4 percent," a decline that reached 0.9% by the time the programme reset later in the hour.
The front end did the work in the bond market. Two-year yields rose six basis points through 470 and later to about 473, a seventh consecutive session higher and the highest front-end yield since July 2024.
Abramowicz located the exact moment. She said the inflection lower in stock valuations and higher in the front end came on that line.
2. A Dose of Accommodation
The second clip carried the framing the guests spent the hour unpicking.
Warsh on the statement: "Inflation remains elevated. Today's policy action will support a timelier return to the committee's 2% goal. I would be hard-pressed to describe broad financial conditions as restrictive. This view was widely shared by the committee. So we removed a dose of accommodation."
Ferro read the phrase as an open-ended commitment — a subtle sign that more of the same is coming.
Warsh also set out the sequence himself in a later clip: "My commitment in June was to reaffirm to the American people, to anyone listening, that we will deliver price stability." In July, he said, the aim was to buy time; at Jackson Hole in August, "we're committed to a discipline, not to a decision."
The contradiction the desk kept returning to is the summary of economic projections, which does not show inflation back at 2% until 2029 even as the statement promises a timelier return. Asked about it, Warsh said those are not his projections.
Abramowicz said that answer is where the whole disagreement sits, and that the rest of the committee will have to explain what timeliness means over the coming weeks.
3. A Tighter News Conference
McKee, who was in the room, was asked what had changed since July.
"They changed the seating chart for one thing and moved reporters all around by alphabetical order, an effort, they say, to give more fairness." He said a lot of different reporters were called on.
"But you notice that Kevin Warsh was much more direct, and he spoke in very short sound bites." He did not give long answers about the economy, and McKee said he is trying hard not to give the market anything to hang on.
The whole thing ran 30 minutes, and McKee said follow-up questions were not allowed.
Abramowicz noticed him coaching the room: "To me, it was also interesting that he was trying to retrain people, saying, if you ask two-part questions, I'll pick which part I want to answer."
Asked whether he was satisfied with the answer to his own question, McKee said: "No, I wasn't." His objection is structural: whoever submitted the 2029 forecast, the chairman is still responsible for a statement promising a timelier return, "And then they say they're not. So how they square that, I don't know."
The question he did not get to ask was where the Fed thinks it can actually affect inflation, given it cannot move the price of oil or other commodities.
A third anchor at the table was less diplomatic: "I will editorialize that was a disaster." He described a hockey-stick move in the market and singled out the discipline-not-a-decision line as the heart of it.
Abramowicz pushed back. She said Warsh would not read it as a disaster, because what followed was a flattening yield curve and a cap on long-end yields — and that a committee genuinely worried about inflation should welcome more restrictive financial conditions, which means lower stock prices and higher front-end yields.
4. The 3% Breadth Metric
Ferro's argument was that Warsh has quietly supplied the reaction function critics say he lacks.
The metric is the number of inflation categories printing above 3%, which Warsh referenced at Jackson Hole and again here. Ferro said it will now be the thing the market counts after every inflation report.
Abramowicz tied it to the limits of the tool. The Fed cannot control oil prices, she said, but it can act on the second-order effects, and those show up in the broadening of inflation metrics.
Warsh also disclaimed data-point dependence, which Abramowicz relayed: "He also said, I'm not waiting breathlessly on any particular data point." What he watches, she said, are the trend lines.
Ferro thought that claim did not survive contact with the week's events, since the difference between a 0.2 and a 0.3 inflation print was the difference between the market pricing a hike and pricing a hold.
Abramowicz's version: "Maybe Kevin Warsh wasn't waiting breathlessly, but everybody in the market was."
5. A Credibility Hike
Roth joined at the table and called the delivery convincing before taking apart the rationale.
Her first read was that it was consistent with Jackson Hole. There had been a question about whether Warsh meant it or was repairing earlier communication, and "it was a very believable delivery of a relatively hawkish hike."
The accommodation line is the one she flagged as pivotal. "Yeah, I think that was one of the single most important lines in what we heard today" — evidence, she said, that this is not a one-and-done and that considerably more accommodation is still to be removed.
Her own forecast is milder than the market's. "I think the data will ultimately look a little bit better such that they can probably just end up hiking twice."
Asked what the market was voting on, she said repricing rather than distrust. Warsh sounded more hawkish than expected, so a longer string of hikes has to be priced; she does not read it as a comment on his credibility.
On the sources of inflation: "I would say there's three main categories of inflation that's driving above-trend inflation." The war, which she and the anchors had been discussing as the geopolitical force pushing yields up; the chip shortage, which she called the most important to watch because it has not gone away; and tariffs, which she expects to roll off.
Her forecast is that the breadth measure improves. The three-month trend is already down a lot, she said, and the six- and twelve-month trends Warsh cites will follow in a couple of months.
Ferro's objection is that none of the three is rate-sensitive. He asked what the hike achieves: "So why are we doing this afternoon for anything other than just a credibility hike at this institution?"
Roth conceded the point in part. "To some extent, it is a credibility hike." Days earlier the question was live, and the answer turned on a couple of basis points of core PCE. "CorePCE was tracking about 0.23% based on our numbers today," she said, in line with what Waller had described as a level at which the committee could sit back and hold.
What decided it was positioning, not data: "The market took them there. The market wanted them to hike, and they had to deliver it."
On the higher neutral rate, she is not persuaded. The committee shifted its long-run estimate up and the market believes it, but she expects nominal GDP growth — a figure she said people keep quoting at 6.5% — to be a lot slower a few quarters out.
6. The Neutral Rate Moved
McKee came back with the number underneath the debate.
"They did forecast that in the median dot. They raised it to 3.2% from 3.1%. And it was 3% last year." The committee has been walking the neutral rate up, which he offered as one reason it felt able to hike.
The real-rate evidence is the striking part: "You look at the 10-year Treasury real rate, and it's basically at an 18-year high."
His conclusion reframes the whole meeting: "So at this point, it may not be as much inflation as it is just a reordering of the economy."
The third anchor had the same read from the price action. "I got the 30-year real yield at three basis points to a new record high," he said, alongside a 2.8-standard-deviation move in the dollar index. "These are seismic moves." He added: "I have real trouble believing it's just about the data."
He read out a client email from Drew Mattis at MetLife, whose verdict was four words: "Long end rates rose equals failure."
7. More Than One More Hike
Dutta joined with Roth still at the table.
He is more hawkish than the consensus on the path: "Yeah, I do. I think there's certainly more to go. I'm a little skeptical that it's just going to be one more."
The forecast revisions tell the story, in his reading: "The unemployment rate was revised down, core inflation was revised up." Because the committee also raised its longer-run estimate, the policy rate moves in tandem and the overall stance does not really change.
The question he thinks markets have to answer is the uncomfortable one: "Do you actually need to cool the economy down to get inflation to 2%?" Plenty of people assume not; he is not sure.
He dismissed the one-and-done chatter as sell-side drift. "Like a few weeks ago, no one even thought that they would hike in September. Some people thought the next move would be a cut."
His near-term inflation list runs through things the Fed cannot reach either. Employment is running above break-even, which biases unemployment lower; "AI is putting upward pressure on, prices for computer electronics, consumer electronics"; and "Obviously, oil and gas prices rising at a time they normally go down. Food prices likely to accelerate."
Asked whether this stops the equity rally, he did not hedge. "I think there's reasons to expect the consumer to slow from here. We probably hit the high watermark already. There's reasons to think the Fed's going to keep hiking. I don't know why that's a good setup for equities."
On whether the new chair surprised anyone: "I think, look, in my professional career, Kevin Warsh has always been most comfortable making the hawkish case." He is more hawkish on rates because he is more bullish on the economy, and Dutta rejected the suggestion that he misled the president who appointed him.
He also explained why Warsh will not answer the restrictiveness question directly. "He's very bullish on the economy. If he's bullish on the economy, how can policy be restrictive?" His advice was to stop reading second-order signals: focus on what he is doing, which is hiking.
Roth disagreed with him on the growth consequence. "I don't think the rate hikes will do it. There's so much going on that's not really so rate sensitive, especially on the AI side," though she named housing as the exception that is already struggling. "I think what's going to end up happening, though, is the inflation data will come in softer" and fewer hikes get delivered than are priced.
Dutta was unimpressed by the productivity story underpinning Warsh's optimism. On the AI-driven golden age Warsh has talked about since his nomination: "There's not really much evidence. The statement talks about how productivity is strong. I must tell you, I don't really see that, at least not for the first couple of quarters for which we have data."
Ferro seized on the chairman's exact wording, that the American economy appears to be strengthening rather than that it is strong — a notable claim, he said, with front-end yields up 100 basis points year to date and crude much higher.
McKee's read on that phrasing was political. With the projections showing faster inflation and growth below what the president would want, saying the economy is strengthening balances the message; going into midterm elections with the central bank forecasting rising inflation is something an opposition party can use.
8. Banks and a Flatter Curve
The anchors spent the last part of the hour on the market's own verdict.
Banks took the hit. Ferro noted Goldman Sachs down four or five percentage points into the close, after banks had traded well all year on strong nominal GDP, and after cautious guidance from Bank of America.
Abramowicz connected it to issuance. She cited Brian Moynihan's recent point that higher rates and rate volatility have made issuers hold back deals, slowing capital-markets activity — which she argued is the one channel the FOMC can actually affect.
The curve flattened rather than steepened: yields up six or seven basis points at the front end, down about two basis points on 30s at roughly 535.
Ferro flagged it as a possible turn, carefully. "Equities are down 1 percent. Banks are getting hammered and the yield curve is flattening." For the first time in months, he said, he is seeing markets price marginally lower growth — the year has had a massive repricing in energy and rates but no growth scare.
Abramowicz's competing frame is that this is simply the new neutral, with rates not coming down materially even through a hiking cycle, which is why long-end yields are not dropping.
9. Not a Newsletter
The refusal to give forward guidance was the running joke and the substantive complaint.
Ferro's favorite line of the news conference, which he said a Bloomberg subscriber had messaged him about too, was Warsh's "I'm not a Wall Street newsletter."
The deeper objection is the target's horizon. "It's a rolling three-year target. I think that's something that people are missing right now."
Abramowicz's line closed the argument: "And evidently, three years is now more timely than three years ago."
Dutta's final word turned the credibility question around. "Well, my final word is, as much as people want to say Warsh is incoherent, the forecasts, which he doesn't even say he's a part of, are incoherent."
The specific incoherence: "The Fed has above-trend growth over the next two years with the inflation rate magically declining a percentage point from now until then. Tell me what model that makes sense."
His conclusion is that the Fed eventually has to choose. If it is not comfortable with 2% always being three years away, it will have to engineer weaker activity — and it cannot dodge the consequences for already-depressed sectors. "The Fed's job is ultimately to balance aggregate supply and aggregate demand. They can't be picking winners and losers in terms of sectors in the economy."
Abramowicz's own summary of the meeting is one word, timelier, and her point is that a Fed committed to a timelier return cannot get there without some softening in the economy, unless supply cooperates.
10. The White House Reaction
The programme closed in Washington on the reaction from the president who appointed Warsh.
The president had not commented at the time of broadcast. Bloomberg's Washington anchor said the decision was not the one he preferred, which is a cut.
The administration response came through a deputy: "We have heard from his special assistant and deputy press Secretary, Kush Desai, who spoke on Fox News saying that the rate hike was unfortunate, that it isn't going to do anything to bring oil prices down" — while adding that the president still respects Fed independence.
The framing she attributed to the president is a borrower's, not an economist's. He treats the United States as a highly creditworthy borrower that therefore deserves a lower rate, which she noted is not how the theory works.
He has aimed his pressure past the chair. "He said repeatedly he has another board to deal with, and he has encouraged those other FOMC members to get more patriotic and get on board with a rate cut."
The political read is about the calendar. With 48 days to the midterm elections, and given the president's own view that the cutting cycle beginning in September 2024 was politically motivated to help the incumbent party, she would not be surprised to see him cast a September hiking cycle the same way.
She named where the response would probably come: a North Carolina rally that evening for the Republican Senate candidate, if it had not already arrived on social media.
Bonus Insights
Warsh also gave three reasons for high long-end yields — a stronger economy, competition for capital and geopolitics — which Abramowicz noted were the same three every strategist on the programme has been giving.
Ferro flagged the next speaker to watch: Fed Governor Michelle Bowman, due on Friday morning, who he expected would have something to say.
The third anchor reached back to 19th-century monetary theory for a framework on the real rate, and wondered aloud what John Williams made of the news conference.
He also read the tone shift as intentional: "I think this is the new Warsh." The chairman said he was changing things, and the anchor's point was that the market saw it happen.
The desk's collective verdict is that this was a hike the incoming data did not force and the market did, that the Fed's stated urgency about inflation is contradicted by its own projection of 2% arriving in 2029, and that the drivers of today's inflation — a war, a chip shortage and tariffs — sit outside anything the funds rate can reach.
Products, Companies & Tools Mentioned
Goldman Sachs and Bank of America (The bank selloff into the close; Goldman fell four or five percentage points, after Bank of America's more cautious recent guidance)
Wolfe Research (Roth's firm, whose tracking estimate put core PCE at about 0.23% for August)
Renaissance Macro Research (Dutta's firm; he expects more than one further hike and does not see the productivity boom the Fed's statement describes)
MetLife (Drew Mattis emailed the programme the line "Long end rates rose equals failure")
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