Warsh Sounds Alarm on Hyperscalers-Driven Inflation

A former Federal Reserve governor has made it clear that he is not pleased with the current inflation rate, labeling himself as a 'hyper-hawk' in response to the issue. Kevin Warsh expressed his concerns about the impact of the hyperscalers' investment programs on inflation. The typical Fed hiking cycle involves about 300 basis points or more of rate rises, but markets are currently pricing in only around 100.

This discrepancy has raised concerns that investors may be underestimating the severity of the upcoming interest rate hikes and their potential impact on asset prices. As Warsh pointed out, a conventional rate cycle would be 'brutal for equities and private markets'. Despite this warning, investors appear to be treating the first Fed hike in three years as good news.