Hawks Take Flight | Joseph Wang on Fed’s Hawkish Hike and Warsh’s Gameplan
Episode publishedPodcast: Monetary Matters with Jack Far...Monetary Matters with Jack Farley
Transcript preview
Preview only
We are live right now. I am joined by Joseph Wang, former senior trader for the Fed, a commentator on the Federal Reserve. Joseph, what did you make of the Fed meeting that just concluded Kevin Worsch's third meeting, the first hike. What are your thoughts?
Well, first off, thanks so much for inviting me. It's great to be back here. Great to see you again, Jack. Now I am actually pretty happy about this outcome because this is one of the, not always, doesn't always happen, but I did call this perfectly well. After I heard the Jackson Hole speech, I was pretty sure that we were gonna hike in September, like 90% sure. Because when you read carefully his speech, it was, super it clear. He added two new things into his speech that he hadn't added before at Jackson Hole, which of course is when a Fed chair gives his big speech, he knows he's changing
That was quite a ride we went on in 2022, and it will it will almost certainly be a smaller ride, but it could be another hiking cycle. Joseph, I I have to say, yeah, I was breathing in my own copium. I thought, you know, a month ago that he wouldn't hike, and then obviously, I knew today the 80 to 90% chance that he would. You know, I I believed that. But it was way more hawkish than I thought, and the market agrees. The two year going up 12 basis points, a massive flattening of the yield curve, the dollar rallying, risk assets, small caps, the S and P selling off hard, semiconductors selling
Well, he described it in a few ways. He suggested that growth was strong. So the Fed is a dual mandate central bank, right? So one is the growth was strong. Second was that dual mandate, the employment mandate, he felt that he was meeting it and for good reason too. If you look at a trend of unemployment, it's been trending lower. We're at like 4.1% right now. That's been holding for the past few months. And last month, of course, headline job creation number was also very good. Now, on the inflation mandate front, it seems like looking at the trend, it was not favorable to him. So he felt lik
That makes sense. Just making sure we are, live on YouTube. The ex the ex viewers are adding up as well. So, Joe, just to summarize, he, yeah, not only hike today, but that real key language that he used, He said, removed today, removed the dose of accommodation, which implies that yields and rates were accommodative, which I don't think any people at the Fed had said. People said that rates were maybe neutral or a little bit restricted. This is totally new. This is a bombshell. Yeah.
It is a bombshell. And he said that at Jackson Hole and everyone was like, nah, he's not gonna hike. Dude, this is like billboard level stuff. Like he's like taking something like hikes and just smashing your head with it. You're right, Jack, in the past, you know, we would have people like Powell will come and talk to you and say, yeah, it was kind of accommodative, kind of restrictive, you know, maybe on the upper ranges of neutral, I believe is how he would describe it. Now there's just straight up telling you that they don't really feel that they're restrictive. He's looking across the tab
So you think at least two more hikes, not one?
I think two more hikes, yeah. But I get a lot, this is a dynamic thing. He's not telling you, you know, committing to stuff like this. But my sense is that this is going to have to do with two things and it's how the financial markets take this. I think an ideal situation from the Fed standpoint is that we take a little bit of air out of the equity market and because of that, maybe yields come down a litt
Keep exploring with a free account.
A free account preserves the short preview. Upgrade to Pro for the full transcript and episode chat.