Warsh's Rate Decision Sparks Credibility Shock Among Investors
The new Federal Reserve Chairman, Kevin Warsh, has caused concern among investors due to his recent rate decision. A 'central bank inflation credibility shock' has been triggered by his actions, according to Bank of America's U.S. economy team.
Warsh refused to specify what would make him vote to raise rates during the Fed's July 29 press conference, leading some to speculate that he might not be willing to raise them at all. This lack of clarity has raised questions about his commitment to tamping down inflation.
The next rate decision will be announced on September 16th, and investors are watching closely as the price of gold is already behaving as if inflation is going to continue to run higher. The interest rates on debt, such as mortgages and corporate debt, are trending substantially higher than the federal funds rate.