Fed Chair's Rate Freeze May Have Been Tighter Than a Hike

Eric Hickman, founder of Lantern Capital and a veteran bond fund manager, has made an unexpected claim about Federal Reserve Chair Kevin Warsh's decision not to raise interest rates. According to Hickman, this move may have tightened the economy more than actually raising rates would have.

Hickman based his argument on calculations showing that $115 billion was lost across all maturities of Treasurys, coupons, and bills from before the Federal Open Market Committee decision on Wednesday through Friday. This suggests that investors were anticipating a rate hike, and when it didn't happen, they sold their bonds.

This may seem counterintuitive, as one would expect raising interest rates to tighten the economy by increasing borrowing costs for consumers and businesses. However, Hickman's math argues that the uncertainty caused by not raising rates had a more significant impact on the market.