Warsh's Rate Hike Bid Foiled by Lack of Votes

The Federal Reserve's decision to keep interest rates steady has sparked controversy and confusion. The vote was 9-3, with three members dissenting in favor of higher rates. Chairman Warsh, who was a key proponent of raising rates, has been criticized for his handling of the situation.

Warsh wanted to demonstrate that he is serious about inflation, but lacked the necessary votes to do so. He had pledged to vote with the chairman, and it's likely that he would have gotten two or three more votes in favor of a rate hike. However, raising rates without a clear majority could be seen as a sign of weakness, particularly in the current political environment.

The bond market has reacted negatively to the decision, with long-term yields rising and short-term yields falling. This is known as a bear steepener. The 30-year bond yield is near a 20-year high, and interest rates on the debt are over 20% of total revenues.