Episode 1415: "The Most Performative Interest Rate Hike Ever"
A Performative Fed Hike: Markets Lead, the Fed Follows
A Performative Fed Hike: Markets Lead, the Fed Follows
Today's Post - https://bahnsen.co/4j4mxuI
David Bahnsen discusses the Fed’s quarter-point rate hike, arguing it was largely “performative” because markets had already tightened financial conditions and the Fed is now following rather than leading. He notes the fed funds futures market implies an 87% chance of another hike this year and reviews the political speculation around Chairman Kevin Warsh and President Trump, including Trump’s post calling for 1% rates while diverting attention to trade deficits. Bahnsen highlights the unanimous 12–0 vote, the Fed’s focus on price stability amid supply-shock pressures, and the neutral mechanics of paying 3.9% on reserves. He reviews muted bond-market moves, elevated mortgage rates near 7%, and cautions against overreading immediate stock-market reactions, emphasizing earnings, AI, oil, and valuations as bigger drivers than the fed funds rate.
00:00 Welcome and Fed Week
00:44 Why the Fed Matters
02:08 Performative Rate Hike
05:11 Politics and Independence
10:54 Midterms and Next Hike
11:52 Unanimous Vote Rationale
14:34 Bond Market Reaction
17:02 Stocks and Volatility
19:05 Practical Takeaways
21:28 Closing Thoughts
Links mentioned in this episode: DividendCafe.com
David is the Founder, Managing Partner, and the Chief Investment Officer of The Bahnsen Group.
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