Bloomberg Television Sep 17, 2026 7 min
With Jane Foley, Head of FX Strategy at Rabobank
Jane Foley's reading of the Fed chair's press conference is that it was not a choice. Kevin Warsh dislikes forward guidance, and he gave a great deal of it anyway, because the alternative was worse.
The anchor's framing was that Warsh had been unusually clear in 29 minutes. Foley's was that an unclear Warsh would have cost the Treasury market and the dollar, and that he had already learned this at an earlier meeting.
"He had to establish the credibility of him as Fed governor, and he had to give a hawkish message."
Foley runs foreign exchange strategy at Rabobank and spends her day on exactly the question this raises: if the dollar stays strong, what is on the other side of the trade. She took the same second-order-effects test to the Bank of England and the Bank of Japan.
The full segment is covered here so you can skip it.
Here are the 6 arguments that matter.
Key Takeaways
Warsh's hawkish message was defensive rather than optional, in Foley's account, and the cost of not delivering it would have landed on the Treasury market and the dollar
She thinks the inflation is still a supply shock, which central banks cannot address, and that the labor data does not yet show wages following prices
A hike now may mean fewer hikes in total, which is why she reads it as a positive for equities rather than a negative
On the dollar she reframes the question: if you sell it, what do you buy — and she says that is not straightforward
About 30% of the gilt market is foreign-owned, and she calls that money more reactive to news ahead of the October 28 UK budget
The Bank of Japan meeting is the most interesting of the week, because Tokyo has spent years trying to create the second-round effects everyone else is trying to prevent
1. He Had No Choice
Foley agreed with the anchor's reading that Warsh was remarkably clear, then explained the clarity as a repair job. At an earlier FOMC meeting he had not given the market what it wanted, and the reaction in Treasuries and the dollar told him what that costs. His Jackson Hole speech at the end of August went the other way, and the market liked it.
"He did, but he had no choice." — Jane Foley
"Because if you go back a couple of FOMC meetings ago, he didn't give the market the message that they wanted. The Treasury market didn't like it. The dollar didn't like it." — Jane Foley
"And, again, today, I think he knew he had to buy his credibility." — Jane Foley
"If he hadn't done that, it could have taken a very long time to try and win back that credibility." — Jane Foley
"There was too much at stake." — Jane Foley
Asked about the muted political reaction to a Fed chair hiking against the president who appointed him, Foley did not treat it as the relevant test.
"He had to win his credibility. And, you know, credibility, like respect, is earned." — Jane Foley
2. Still a Supply Shock
The anchor asked whether this is a cycle with more to come, and whether to buy the dollar on it. Foley's answer put the burden on the data. Most of the committee expects one further move, but the inflation itself is a supply problem that rate policy cannot reach, and the wage response that would justify more tightening is not visible to her yet.
"You know what? I think he's gotta be data dependent." — Jane Foley
"Yes, most of the FOMC think there'll be one more to come." — Jane Foley
"But, you know, after all, this is still a supply shock. And, you know, central banks cannot do anything about that." — Jane Foley
"So I think the jury's got to be out on that, dependent on how the economic data rolls." — Jane Foley
3. A Rate-Proof Economy
Bloomberg Television put the hard version of the problem to her: households are on fixed mortgages, the AI sector is unlikely to notice 50 or 100 basis points, and the upper-income consumer is insulated. How hard do you have to hit an economy like that to reach 2% inflation. Foley answered through asset prices and through the arithmetic of the cycle.
"Well, you know, a lot of commentators would say, you know, five yield on the ten year will begin to have an impact on stock valuations, for instance, because it does raise the cost of borrowing." — Jane Foley
"By doing something relatively early in the cycle, then maybe there'll be less interest rate hikes overall." — Jane Foley
"Maybe he's got a better chance of getting inflation back down to where it needs to be without aggressive interest rate hikes." — Jane Foley
A stronger dollar does some of the tightening on its own, she added, and then turned the currency question around.
"We've got to look at it as a question about, well, if you're gonna sell the dollar, what are you gonna buy?" — Jane Foley
4. The Bank of England's Bind
The program moved to the UK, where it said inflation could pass 4% quickly and the governor has resisted signaling a hike. Foley applied the same test and reached a softer answer than the market's. Her reference point was 2022, when a tight labor market let workers convert higher prices into higher pay.
"Again, you've gotta come back to the question of second order effects." — Jane Foley
"The Bank of England can't do anything about, you know, these supply shocks." — Jane Foley
"You don't have that labor market tightness that would really bring about those second order effects." — Jane Foley
"Well, we don't think it's gonna be this year." — Jane Foley
5. Gilts and the October Budget
Asked whether to sell sterling, Foley said yes, and gave two reasons. The first is positioning: the market has already priced a lot. The second is the UK budget on October 28, which arrives with the fiscal room already spent and with a large share of the bond market held outside the country.
"And if you think about the composition of the gilt markets, you know, a lot of gilts are owned by foreign investors, about 30%." — Jane Foley
"They tend to be a little bit more fickle when it comes to news." — Jane Foley
"We know that going into the budget, the fiscal headroom is really diminished now." — Jane Foley
6. The BOJ's Real Question
Foley singled out the Bank of Japan as the week's main event, and explained why its version of the problem is inverted. Japan has spent years trying to generate the wage-price feedback that every other central bank is trying to suppress. The risk she sees is a board that will not commit to a faster pace.
"I think this is the most interesting meeting of the week." — Jane Foley
"they're coming at it from a different angle, because they've been trying to nurture second order effects to try and get themselves out of deflation." — Jane Foley
"You know, if they hike interest rates too rapidly, do they put themselves back where they do not want to be, with too much disinflation?" — Jane Foley
"Well, you know, now that the dollar's stronger, you know, there is more risk that the yen could be disappointed tomorrow, because there's a couple of inflationists on that board that were put in place by the new prime minister." — Jane Foley
"They may not want to vote for an accelerated pace of interest rate hikes." — Jane Foley
Bonus Insights
Foley's longer view on the yen is more positive than her view of tomorrow's meeting.
"That said, there's a lot of reforms in Japan, and I'm quite optimistic that the yen over the medium term can hold a better tone." — Jane Foley
She also made a point that cuts against her own bearish case on rates having little traction. When the anchor said the 10-year yield was not hurting stocks that morning, she agreed immediately rather than defending the claim, and moved to the argument about the shape of the cycle instead.
Foley's bottom line is that a central banker with a credibility problem has to spend a hike to fix it, and that the second-round effects which would justify a long tightening cycle are not yet present in the labor data of either the United States or the United Kingdom.
Products, Companies & Tools Mentioned
Rabobank (Foley's employer; she spoke as its Head of FX Strategy)
Federal Reserve (Warsh's press conference and the FOMC's expectation of one further move)
Bank of England (The second case she applied the second-order-effects test to, with no hike expected this year)
Bank of Japan (The week's most interesting meeting, in her view, and the source of the risk to the yen)
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