FOMC LIVE: Fed Rate Decision (RATE HIKE?!) & Kevin Warsh Press Conference | XRP, BTC STOCKS REACT

Hello and welcome to Martin Lucas Investor. My name is Sensei and I'll be your host tonight for the FOMC report, decision, and press conference. So, thank you everyone for tuning in. If you tuned in earlier, you would have seen the UK budget. We covered that. We also covered the Ripple Swell event. Now, we're back for the FOMC live. So, with that comes the rate decision. We're not getting a summary of economic projections today. We are getting the rate decision itself. We're getting a statement in about 25 minutes alongside that rate decision. Half an hour after that, we'll be getting the press conference where Kevin Warsh comes out, delivers his statement, answers the questions. That's where we'll see a lot of volatility.

And then we'll do a full analysis on what has been said and what we expect going into December's FOMC decision, the last one of the year, whether or not we're going to get another rate hike or not. All of that's coming up in today's show, as well as after this show, coming up with Google Earnings. I think that's the one we're covering, Google earnings. I believe that will have the biggest impact on the market. Of course, Microsoft will be happening at the same time, so we'll be kind of keeping an eye on both of them, but we'll be listening into the Google earnings as well. So, thank you everyone for tuning in. If everyone can smash that like button, a lot of you, I mean about 5% of the people watching have hit the like button. So, none of you have basically hit the like button. Please do smash the like button. It'll be amazing if you could do that. Subscribe if you haven't done so already. Check out the first link in the description or the pinned comment so you can sign up to the newsletter and take advantage of all the perks such as the chart trading course, the indicators, the desk, the newsletter. All of that is in one subscription, access to Discord and our private events. So, first link in description or the pinned message. Let's get straight into it because we have a lot to cover.

Today, the Fed is expected to hold at 3.75 to 4%. We are expecting a hold. If it's a hike, it will be a surprise to the market and that's when we'll get a crash. 94 of the 100 economists in a Reuters poll said so. And markets price a hold about 93%. So whichever way you look at it, we're looking at a hold to quite a high degree, but not impossible to get a hike today. However, all 100 economists expect a rise by December, as in through that FOMC we get in December. So, we are very much expecting another rate hike this year. Whether it's today or whether it's in December, we are expecting one to happen.

So, when we get that decision of the rate, of the pause, I don't think that will do much to the market. It's the statement itself and the vote. So the vote will tell us a lot more. In July, three officials voted for a rise while the rest held. Beth Hammock, Logan, and Kashkari all voted for a hike. In September, the vote to raise was 12 to zero. So it was a unanimous decision in September when we had our first rate hike of the year. Last time round, only three people wanted a hike. That's why we didn't get one. Hands raised for the rise tonight will say December is close to settled. I'm expecting it to be a hold, but many people wanting a hike as well. A unanimous hold would actually say the committee is willing to wait for more data. So if we get a unanimous hold today or only one or two or three people saying we want a hike, then that would be very interesting. The odds of a December rate hike might fall and the markets may pump.

So why are they even talking about rate hikes? How have we got ourselves in this situation of rate hikes when earlier this year we were expecting, or the market was expecting, I wasn't, Martin wasn't, but the market was expecting five rate cuts, three rate cuts, four rate cuts. The market was saying, 'Okay, we're going into a rate cutting cycle. So why the hell are we even talking about hikes and rises?' Well, Trump and oil. So oil is the reason. Brent averaged $114 a barrel in September, up from $71 in February. And US inflation is at 3.7%. Core PCE, the Fed's own gauge, has actually been below 3% since February. So, my read is a hold. The number I'm watching is the number of people that dissent for a rise. Zero keeps December actually a live debate. Two or three would make it also a little bit debatable, but more likely we'll get a hike. So, tomorrow we'll get PCE inflation. That will be a big part of the puzzle to tell us about December as well. So, today in today's show at 6:00 p.m. UK time, 2:00 p.m. Eastern time, you can see the timer on the screen. In 20 minutes time, we'll get the statement and the vote, and the vote line will come first. So, what we will see is how many people voted for a pause and how many people voted for a hike. I don't think anyone's going to be voting for a cut.

Sensei, you need a map. We thought we lost you. What do you mean taint tainter? What does that comment mean? Then we have, we also get the implementation notes. So bill buying, reinvestment, routine reserve management. We also get that in 20 minutes time. And then in an hour's time, or in 40-50 minutes time at 6:30 UK time, 2:30 p.m. Eastern time, that's when Kevin Warsh will deliver his press conference. We'll have to see what the questions are, but any indication of where December's going and how many more rate hikes we're expecting in this cycle will be very much anticipated and the market will react to that. After 8:00 p.m. UK time, we will be expecting to see Microsoft and Google report. So, we'll be covering Google earnings as well. Tomorrow, we will be seeing September's inflation data and also Q3 GDP. So, two bits of important data coming out tomorrow. Let's go to our very own cheat sheet. We send this out to our premium members. And here is some data to back up what we're saying. Oh, zoomed in a little bit too much for you. So, let me move inside a little bit.

So, why are we talking? How did we get here? Well, if we look at the desk, we're looking at, this is data straight from our desk, and we're looking at where oil is. And that dashed line right in the middle there, that is when the war started with Iran. That is when Donald Trump and Israel started the attacks, and we saw oil shoot up to 117, even higher, 120, and then it sold off a little bit, and now we're back up. So, what we're seeing here is oil jumped about half in the month the war began, and it's back to its April peak. US petrol averaged $4.36 a gallon in September, up from $2.91 in February. So, oil is the reason the Fed is raising rates while hiring slows. Every Fed district reports higher oil prices in the October Beige Book, with fuel surcharges passing costs down the supply chain. And if you're looking at oil there, that's the oil chart, that's Brent crude. And then you scroll down and we look at this. This is inflation very much following suit. So headline CPI moves with petrol. Headline, of course, includes all of the volatile aspects of inflation, which obviously includes petrol. So headline CPI moves with petrol. Core is what the Fed watches for inflation spreading to some of the more concerning parts of what makes up CPI and inflation, which is also going up. Core is also going up, which is also one of the main concerns, more concerning than headline in fact, because remember headline is, okay, we've got an inflation shock, but maybe a year from now it's just a shock, it will go away, we don't need to change rates. However, if it moves into core, which it is, that's when you go, actually, this is not just petrol prices, it's coming into all aspects that make up CPI, which is more concerning.

So there we go, you can see very much a mirror image. Inflation goes up when oil goes up, and that's what we're seeing in all aspects. US CPI in blue, you can see US core CPI in darker blue, lower down, and then PCE in the middle in that sort of gray-beige color. So where the market and the Fed stand, these are the rates. So essentially we are seeing the Fed rate and Treasury yields heading up, and we're seeing rate hikes occur while the Fed is following Treasury yields. We always say look at the 10-year, look at the 2-year, 3-year, and the Fed will follow suit with what those Treasury yields are doing.

What markets price, we're seeing about, if we look at this specific section here, we're seeing hold about 93%. On the CME predictions, if you're looking at Polymarket, it's about 96%. And then when you're looking at a rise in December, it's about between a 70 and an 85% chance of a rise in December. What does the Fed say itself? Well, the Fed says by the end of the year, four people actually expect two rate hikes. That would be a rate hike today and a rate hike in December. You're seeing here about 12 are expecting just one rate hike. So that would be either one rate hike today or one rate hike in December. And then there's only two people on the committee that say actually we'll have no more rate hikes. So that is no rate hike today and no rate hike in December. But you can see 16 out of the 18 are saying either one rate hike or two rate hikes this year. So we are expecting a rate hike this year, but today we're not really expecting a rate hike. We are now actually anticipating it will be in December.

So 16 of the 18 officials penciled in at least one more rise this year, and four penciled in two rate hikes. The September minutes said most participants saw another rise as likely appropriate by the end of the year. Markets have caught up with them for December. When oil shocked the Fed before, we're looking at 1973-1974, what oil did, it actually went up nearly four times. They raised rates in 1973 and then they cut in 1974, and then the recession actually followed in 1979 and 1980.

Oil near, sort of, more than doubled. Volcker took rates to 20% by 1981. There was two recessions. Inflation went from around 15% to 4%. In 1990, we went from $17 to $36 in four months. The Fed eased as cost pressures faded. And then there was a recession in 1990 to 1991. In 2008, oil near record highs, the Fed actually held at 2% in June and then 1% for a raise, and then a recession actually happened December 2007 all the way to June of 2009. And then in 2022 it spiked after Ukraine. The Fed raised rates to 5.25 to 5.5% by July of 2023. CPI peaked at 9.1%, but importantly there was no recession. So we've got mixed data here. When oil spikes, more often than not, a recession follows, but not always.

So you can't just blindly call for a recession. It doesn't happen every time oil spikes like this. What will be good to see for the markets if you're invested in risk-on assets such as the stock market, crypto, what you want to see today in today's event. And guys, if you've just tuned in, we're 12 minutes away from the FOMC decision. So, can everyone please smash the like button? Please do, yeah, smash the like button, subscribe if you haven't done so already. If you want access to the newsletter, our cheat sheets like this one, and our desk and our indicators and chart course, you can just use the link in the live chat. That gives you 25% off and you get onboarded to our Discord and everything like that. You being Liz, yeah, if you can go to the desk, Liz, you're a newsletter member. Just go to desk.sensei.news. We've put the link everywhere. I might make a channel on Discord so you can always have the link. But just bookmark the link desk.sensei.news. Sign in with your newsletter email and you've got access to it.

So what to look out for? This will be good if you're in risk-on assets and you want to see the market go up. A unanimous hold. If everyone says, 'Okay, let's hold,' and we don't see too many people saying rate hikes, then what we actually start questioning is maybe there won't be any rate hikes this year. And the market's not priced in for that. So if every person in 12 minutes time says, 'Okay, we're going to hold rates and no one wants to hike,' that will be great for the market. Or maybe if just one person says it, softer words on jobs. So if we see, because remember September payrolls grew just 29,000 against 90,000 expected. If people go, 'Actually the jobs market's a bit concerning,' and we see that in the statement or in the press conference they talk about jobs being a concern, then normally if jobs are a concern you don't raise rates, in fact you cut rates. So if we see any word on them being concerned about the jobs market, we might see a pump in the market. Also, Warsh separating oil from core. If he really distinguishes saying, 'Okay, oil is not too much of a problem, petrol is not too much of a problem, that's just a headline issue,' then that might give confidence to the market and say, actually, if he's not too worried about oil and petrol, that's what's making up most of inflation, we might not get another rate hike. He seems to be pretty chilled out about it and he only thinks it's a one-time shock, then the market can pump. What would be bad to see would be more than two or three dissents. So if we see five dissents or six, seven dissents that want a rate hike, then that really seals the deal and says, okay, we're going to have rate hikes. If we have talks of expectations de-anchoring, Michigan 5 to 10 year expectations of 3.5% higher since May, that will be concerning. And then if we see Warsh saying December is going to be a rate hike, then again that isn't confirmed yet. And if he says that, then that could be concerning to see as well.

We'll be looking at the statement line by line. So that statement comes out in 10 minutes.

A few of the things that were said. Oh, we've got memberships gifted. Oh, 1978 Buckley, one of our top investors here, has just given away 10 memberships. Guys, if you want to win this, just comment in the chat. If everyone just says hi in the chat now, firstly I get to see who's with us, and then you'll have a higher chance of winning. For example, if anyone does membership gifting again, the more active you are, the more likely you are to win. So everyone just say hi in the chat. That way I can see who's in the chat, and also you get a higher chance of winning these memberships. Also do interact with the show. Hit the like button, press the share button, share it out, and that will be great as well.

So we'll be looking at the statement that comes out in 10 minutes time line by line. 'Inflation remains elevated' again, it would mean more worried about spreading. 'December is going to be quite a high likelihood of a rate hike.' 'Job gains have kept pace with the workforce' that means, okay, we're not worried about the jobs market, more room to wait, friendlier for the markets. So there's a few things we're looking out for, and I'll be going through that statement line by line. In fact, I've actually got the team behind the scenes that will be bringing to my attention anything important in that statement. I'll put it up with the highlighted sections. Hopefully, if that gets to me in time, I'll keep an eye on that.

We will also have Bloomberg open because they will be covering this as well. Let's just tune in, make sure we are live.

And raises more questions about the present because the chairman himself has walked us into this. Ultimately, he's telling us this is a new Fed, that we don't tolerate inflation and we're going to do something about it to get back to 2% in a timely manner. And all we're seeing is the same old Fed, which is why I think we have the mother of all opportunities in front of us. Either this is the new Fed and we see a change in 10 minutes, or we don't, and we can rely on the speeches of Jefferson and Williams over the next several months into December. Well, and not only has inflation been above 2% for 5 years, but it has actually been core PCE, which is the target that they normally look at, has been basically 3% for the last three years. In other words, we haven't seen any progress in inflation for the last three years. It is still the case that PCE, namely the main target indicator that they have, that it has just stayed very elevated. So in that sense, that would be a strong argument for saying we do need to hike more to begin to go from 3% down towards a 2% target.

So Badger, why have things stalled out? Can we just blame supply side shocks? Is there more to it?

I think that there is, you know, definitely mean inflation has been rising quite dramatically, and then I think next year we're expecting much more of a moderation in inflation. So I wouldn't be surprised if they take a much more gradual approach of hiking maybe at March and kind of reassessing what happens before they continue to, you know, continue to hike, because you do have an economy which is kind of bifurcated. The AI economy, I would argue, is somewhat interest rate sensitive. Maybe that's changing as we speak, and that might actually be the reason why the Fed has to be a little bit more gradual, because you are seeing some volatility in some of the high yield names. There's some crowding out clearly that's visible. They're issuing, especially AI hyperscalers, are issuing across the capital structure. So it's going to have some impact on the broader markets, and the Fed's going to need for that, like, some time for this, for the transmission of interest rates through the broader economy.

Subra, if the Fed remains on hold today, do you expect a steepening in the yield curve, a selloff on the long end of the yield curve, especially as we face the supply incoming from AI companies?

Not if it's a hawkish hold. I think if they are, you know, sound somewhat hawkish and committed to, you know, getting inflation to that 2% target, I think that's really what the rates market wants to hear. We really need to see that commitment because inflation is still high and sticky. Maybe it moderates somewhat next year, but over the remainder of the year and probably into early next year, you're going to need to see more interest rate hikes.

Subra, always good to see you.

Okay, we're moments away now from the rate decision. What I'm going to be looking at first will be the rate itself. So, we'll go to this screen here. We'll see is it a hold, is it a hike, and then we want to see how many people actually voted for the hike and how many people voted for the hold. I personally am expecting a hold, but I do actually expect maybe more than, maybe four or five. Let's say five is my prediction. Five people wanting a hike. So, let's see if that's true. It might be a surprise hike. And if a surprise hike comes, you need to be prepared in your portfolio for a sudden move down because no one is really expecting that right now. We could expect to see the S&P 500 drop one, one and a half percent. We can see Bitcoin drop 5% in a minute if that does happen. Unlikely to happen, but as always, I'm prepared for all scenarios. If you're not prepared for all scenarios, that's not great. So very low chance of a hike, but if it does happen, very, very volatile on the markets towards the downside. What I'm looking for straight away in five minutes is the statement. How many people are voting for a hike and what does that statement say? Because that will give us a good indication of how many rate hikes are to come, the language, how hawkish they are, and all those things that will affect the market. Then half an hour from now we'll get the press conference. So obviously don't go anywhere in 5 minutes time and we get that initial reaction, because in half an hour time is the most important part where Kevin Warsh reads the statement and answers the questions, and that's when we get a better idea of what is going on. I am very, very, very confident we'll get a rate hike this year, and obviously that would mean it will be in December because I'm not too confident it will be today. So I'm confident we'll get a rate hike, but I believe it will be in December.

So if we get a unanimous hold, softer on jobs, no December signal, that could be a pump in the market. So if everyone on that committee says, 'Let's just hold rates where they are,' we get a unanimous decision, they're a little bit concerned about jobs, and they don't make any commitment to a hike in December, then that's when the 2-year yield and dollar will ease. The yield will come down. NASDAQ, gold, Bitcoin will firm up now, actually pump a bit, and that would be the good scenario. The bad scenario will be a hike. That would be the worst scenario. Or let's say a hold with maybe five, six, seven, eight people saying, 'Okay, we need to hike as well,' or some really hawkish tone, that would probably bring the market down as well.

So, why does the 2-year Treasury move? Well, it tracks the Fed most closely. That's what we will see move in 3 minutes time. A firmer Fed usually brings up the dollar, which weighs down on gold, oil, and overseas earnings. The NASDAQ growth shares are valued on profits far ahead. So, higher rates bite harder. Alphabet and Microsoft report as well. We'll be covering Google's earnings straight after the market bell.

Gold again, it pays no interest. It has no money making. So when yields come down, if yields slip because people don't expect rate hikes, gold will like that. But if we are hawkish and we expect more rate hikes, then people will go, 'Oh, I can earn a 5% yield with no risk. What's the point of owning gold?' And of course, gold won't like that initially. Yes, there's many other arguments for gold and silver. I like gold and silver because central banks such as China are really stocking up on it. I think it's a good inflation hedge. And there's other reasons to buy gold. But initially, the move would be gold down, silver down if we see interest rates going higher. Bitcoin, XRP, they're your traditional risk assets. They act like risk assets. Bitcoin isn't a safe haven. It trades like a risk asset. So if we get an indication of a rate hike, or if we do get a rate hike, Bitcoin will come down. If we don't get a rate hike and we don't get too many people voting in favor of a rate hike, and we see quite comfortable language around inflation and rate hikes, then that's when we see Bitcoin, XRP and stocks go up.

So what happened last time? Well, the S&P 500 actually rose 0.3% after the statement, and then it fell during the press conference, and then actually it closed down 0.45%. So you can see how important the press conference is. Last time the S&P 500 went up after the statement, 30-40 minutes later with the press conference it basically dropped 1% since those highs. So you can see the press conference is very important to stay tuned for. So yeah, Bitcoin also slipped as well. So people are asking why would the Fed raise rates when hiring is weak? Well, because inflation is the bigger problem right now in their eyes. CPI is at 3.7% and core PCE has been at or above 3% since February. Payrolls grew 29,000 in September, but unemployment is at 4.2% and jobless claims are near the lowest. So jobs aren't really the problem right now. They can tackle inflation. However, if they say jobs is the problem, then that's when we start saying, 'Oh, if jobs are the problem, they're saying jobs is a problem,' then they don't want to raise rates. So we'll see what they say about jobs.

Can the Fed do anything about oil? No. Warsh said in September, we cannot affect the individual price, whether it be oil prices. What it can do is stop higher fuel costs spreading into wages and services. And that's what they do with their interest rates. What happens to mortgage rates? Well, essentially it follows a 10-year Treasury. So if we do get yields heading higher, mortgages get more expensive, and that's what's been happening over the last few months as well. Does a Fed hike hurt Bitcoin and XRP? Yes, it does. Especially if it's a surprise. What is a dissent? Because I'm going to be talking about dissents. How many dissents there are? Well, a formal vote against the decision named in the statement. So if we get people voting against the statement, and the statement today will be about a hold, if we get people voting against it, they're dissenting. And if we get many dissents, then that's when we can go, actually, we're very on track for a rate hike in December, and the market might see that a bit bearish. So we're seconds away now. Tomorrow, we've got inflation data right after this in 17 seconds time. What we're going to have is about 20 minutes, and then we'll have the press conference. So let's see what the statement says. Here we go. Let's go over to breaking news. Let's go over to Bloomberg. Let's do it.

Okay, we're looking at the decisions. We're going to have Bloomberg as well.

The other is that they are convinced they'll still hike in December. Heading into it, the price action shaping up as follows. Two days of gains on the S&P. Hello, day three. Up by 2/10 of 1% on the S&P this afternoon. On the NASDAQ, up by 2/10. Also in the bond market, yields twos, tens, 30s looking like this. Up by two basis points at the front end of the curve to 4.76, on 10 this afternoon around 5% with your Fed decision.

Okay, they're held. They held rates. Rates are held.

Okay, there is news. No change in rates, but it's a 10 to 2 vote with Governor Lisa Cook joining Cleveland's Beth Hammock in dissenting in favor of a quarter point increase. The statement says inflation remains elevated. Then goes on to say the accumulation of more information will help the committee determine the policy stance appropriate to ensure the timely return of inflation to the committee's 2% goal. It repeats officials' promise to deliver price stability. The economy is expanding at a strong pace, the statement says. While uncertainty remains elevated, owing in part to geopolitical developments, domestic spending has been resilient. Productivity growth is strong and capital investment is robust. No problem on the unemployment side of the mandate. Job gains have kept pace with the workforce, the statement says, and the unemployment rate has changed little. And that's it. Still, we have a couple of surprises. Everything they say about the economy in the statement would point in the direction of a rate increase. Dallas Fed President Lori Logan did not dissent even though she's called for a series of rate increases. And the biggest surprise, the dissent from Governor Cook. I don't want to make too much of this, but President Trump is still trying to fire her and he wants lower rates. So, no action from the Fed today, but a lot to ask Chairman Warsh about in his news conference.

Mike McKee, you get in there. Looking forward to your question at about 29.

Okay, so we've just got the decision. I'm going to bring up the statement on the screen in a second. Stay with me because the press conference is what happens next, and that is possibly the most important, well, I know it's the most important part of this. So let's go to our press release here. Thank you to the team that's just sent this in. Let's go to this screen here. This has just been released one minute ago. The Federal Open Market Committee has approved the statement for release by a 10-2 vote. So, not as many as I expected, and it is a little bit hawkish, but not too much worse than expected. So, 10 to 2, two people dissented. How is the market taking it before we go any further? Yeah, the market likes it. It's not as bad as we expected. The S&P 500 also being very volatile on that first candle. I wouldn't be trading this right now. It's too volatile. We need to wait for the press, for the speech, the press conference in 27 minutes.

The committee decided to maintain the target range for the federal funds rate. Yeah, so essentially the decision is a hold, and that's what 93% of the market expected. Economic activity is expanding at a strong pace. That's actually upgraded since last time's language. Last time it was at a solid pace in September. A strong economy gives Fed room to raise again. So look at this. This is how important it is to look at these specific words and look at it compared to last time. No one does this. Everyone just comes out and they just cover it and they don't know what they're talking about. What we're looking at is the specific words in comparison to last time's statement. And the words are very important. They spend hours making sure, they spend to write these statements. They want to get every word correct because every word means a lot. And what we've just discovered here in the second paragraph in the statement release that's just come out is upgraded language. Last time they said solid pace, now they're saying strong pace. They upgraded the word from solid to strong. You might not think that means much, but that means lots. Why does it mean a lot? Because solid to strong, they are upgrading that language. They're making it a lot more intense. They're saying it's a strong pace. Economic activity is at a strong pace. What does that mean? Well, it means that the economy is strong. The economy is expanding at a strong pace. Not a solid pace, at a strong pace. Meaning we don't need to be so concerned about the economy. We don't need to tiptoe around. We can hike rates when we want to hike rates, and we will hike rates because the economy is strong. That means it can take a rate hike and nothing will, and it's not concerning. So what they've just said there is, for me, that upgrade of language is enough to say I'm 100% confident of a rate hike in December, because they wouldn't be saying the economy is strong unless they're gearing up for a rate hike. So so far no rate hike today, but that sentence in itself, very easy to overlook, but it's saying the economy is super strong. It's expanding at a strong pace. We can hike rates because of the fact that the economy is so strong and it won't have an effect.

We also have a sentence here: 'Job gains have kept pace with the workforce and the unemployment rate has changed little.' Oh, interesting. So again, despite the fact that earlier in the show I mentioned that the jobs were a bit softer last month, in September there was 29,000 on payrolls instead of 90,000. So we would have said, okay, maybe they'll say something about that, and if they are concerned about jobs then they won't hike rates. But what they've actually said is they haven't changed their language, and not changing their language means as much as changing their language. What they've said there is we're not worried about jobs, and jobs have kept pace with the workforce and unemployment has changed little. Don't worry about jobs. We're not going to, that's not affecting our decision. What they then went on to say is inflation remained elevated, and that's what the concern is. Interesting what they've said here actually: 'the accumulation of information will help the committee determine the policy stance appropriate to ensure a timely return of inflation.' So they are still saying we are very much waiting for inflation data. We'll be covering inflation data live on this channel tomorrow morning. So interesting. Well, it's not interesting, they always say we're going to wait for the data. But there we don't have any confirmation of a rate hike in December, and they're saying we'll wait for the data. So if the data is suddenly really good, which I don't know how it would be really good, then they'll say, okay, we won't raise rates. But that's just a statement there that says we always look at the data. So I wouldn't read too much into that.

Guys, if you've just tuned in, hit the like button. We're 23 minutes away from the most important part of the night, the press conference. This is Kevin Warsh coming out and telling us why he didn't raise rates, what his plans are, how bad inflation is, what he thinks about. I mean, you might mention that someone might ask him about Trump and the midterms because Trump won't be happy about this decision. He would want a rate cut ahead of the midterm election. So, a lot to come. So please do stay with me. The press conference starts shortly. In that time, we can really dissect this. We'll look at this statement that's just been released 5 minutes ago, and then we'll look at the charts and answer your questions. So, if everyone can just take one second to smash the like button. It takes one second and it's really appreciated. So, please smash the like button, subscribe if you haven't done so already. If you want analysis like this, if you are invested in the crypto market, the stock market, we've put together the best package there is on YouTube. We have a newsletter that goes out right before the opening bell every single morning. So, all the news you need to know, very nicely presented. There's a bit that if you only have one minute a day, you can just open your email, scan the top, it gives you all the headlines of the news. Then if you want to spend another five to 15 minutes reading, each of those stories have two paragraphs and then my thoughts. So you can look at the facts and then you can look at my thoughts. Five stories that you need to know every day. Then there's a chart of the day. All comes one hour to two hours before the opening bell every trading day. You also get the crypto newsletter on Sunday with charts for XRP and other cryptos. You also get the chart trading course. So if you're interested in technical analysis, which last time I did a research, about 85 plus percent of fund managers do technical analysis. So it's not just for retail traders. If you want to learn about technical analysis, if you want to do a technical analysis course, which isn't absolute garbage, which is what 90% of people sell, it's based off academic research and it's just three hours long. You can get that as well. You can also get the TradingView indicators I use on every single one of my charts. You can get access to the Sensei desk, institutional grade data with all the calendars, the earnings calendars, the economic calendars, the economic data, the company data. You can type in the ticker symbol and it presents the whole financials in a very simple and easy way to understand. You get access to Discord, our private events. If you want all of that, if all of that sounds good, there is the link in the live chat. You can sign up for free, you can choose the monthly plan, or that link gives you 25% off the yearly plan. So click on that link, choose which way you want to subscribe, and you can do it. Let's go back to our analysis.

So so far it's looking like we're set up very, very well for a rate hike in December.

What do we have here? This is the statement that's just been released. Let's read this next section. 'Voting against the monetary policy actions were Lisa D. Cook and Beth M. Hammock.' So we got two people dissenting. That's Governor Cook and Cleveland's Hammock wanted a rise. Logan and Kashkari, July's dissenters, did not actually dissent today. They both wanted to actually, so they didn't want a 0.5% hike, they just wanted the standard 0.25%. So, we had two dissenters, less than potentially I expected and the market expected, but enough to say, okay, there are people that want rate hikes within that committee.

There's not much left. That's pretty much the statement that we've got. That's a one-page statement. They have really cut these down since Kevin Warsh came in. We did get decisions regarding monetary policy implementations. The first bullet point there essentially saying rates paid to banks are unchanged. Over here, purchase of Treasury bills. Yeah, bills buying from reserve management set in September. It's not stimulus. So, we've got no quantitative easing there. Just normal purchases of Treasury bills. So, there we go. That's the full statement, and that's just got released. The next, the biggest part of the night is in 19 minutes time with the FOMC decision.

Let's look at how the markets reacted. Okay, the market initially reacted, so pumped and then dumped. So we're down a little bit since that decision came out from the peak. We're actually down 0.2%. So nothing significant yet. Gold didn't like it. Essentially, guys, this wording here, which I picked up on straight away, 'economic activity is expanding at a strong pace,' that they're gearing up for a rate hike. They wouldn't change the language from solid to strong if they weren't getting ready for a decision to hike. They're putting that in to prepare the market for a hike. They're putting that in to say, when we do hike, don't be concerned because the economy is very strong. It can handle a rate hike. That sentence there is what's telling us they're getting ready for a hike, and the market is seeing that sentence and going, okay, the next decision is a hike. Bitcoin selling off as well since that statement. It pumped initially then sold off. I think what's happened, I can read it very clearly.

Initially what we got, the first bit of news that everyone could see, it was a pause. So everyone was like, okay, that's expected. We all knew that. The next thing everyone was looking at was how many people voted against that, how many people wanted a rate hike. The market, in my opinion, was expecting about four or five people to dissent and say, 'We want a rate hike.' They saw that and they went, 'Oh, there's only two people that dissented. That's brilliant. We're not going to get a rate hike.' The market pumped because you get that information straight away. You can read that too. All you see is, 'Oh, it's not five, it's two. It's less than expected.' The market buys that up. The algorithms love it. They buy it up. And then very shortly after, you look at the reading here: 'Economic activity is expanding at a strong pace.' That's not a random sentence. They changed that from solid to strong. Once you figure that out, you go, 'Oh, actually, yeah, okay, less people dissented, but they're gearing up for a rate hike.' So it kind of all balances itself out. We kind of expected a rate hike in December, so we haven't really got that much new information. What we want to wait for is this press conference, but I am pretty much 100% confident of a rate hike in December.

Now, yes, they've also said, and I will continue to look at the economic data. That's why we have a whole section in the desk when we go to markets and go to economic data. We see what inflation is, and we track, and one of the charts I like to track is how is inflation doing, all different aspects of inflation. You can see we're missing one line because that's US PCE. We'll get that tomorrow and we'll see how that adds up. But yeah, you can actually add all the different measures of inflation as well. If we add PPI to this chart as well, you can see all types of inflation are rising. And if we actually look at the cheat sheet that we send out to all our members before these major events, you can see these charts here. Oil goes up like that. Inflation follows just like that. So we would expect tomorrow's PCE to come in up as well. But if by some miracle PCE is less than expected and over the next inflation data between now and December is great, maybe, just maybe, we get a pause. But it's not looking likely at all, especially with how oil is spending way too much time above $90 and now actually spending time, if we look at the oil chart, above $100. Yeah, the longer we stay above $90, the more concerning it is. And the longer we spend above $100, every month we spend above $100 is basically another rate hike. So let's see how oil does as well. But very much geared up for a rate hike. Let's go to Bloomberg for a second as well for their analysis right before the main event of the night, which is the FOMC press conference. If you guys are in the live chat and you want access to all of those indicators, I use them on my charts. I just press this button here. We can see if we're in a bull market or bear market. Momentum band. And one second. There we go. And yeah, the chart course, the indicators, access to Discord, our private events, all of that sort of stuff. The link is in the live chat. Let's go back to Bloomberg while we wait for the press conference.

Are they worried about breaking something with some of the fragilities we've seen in the AI boom, in the issuance of debt for AI buildout, and the backlash that we're seeing at the grassroots level by voters? They have tied the AI backlash across all age groups, income strata, and party affiliation. There's nothing that has sort of united the electorate like that. And that has even been flagged in one of the IPOs about to come out as a risk for data center construction going forward. So I think there is some of this concern about what will they break if they go too fast, but this sort of caution and this posed conviction, when you said it best a couple of times, we've got over five years of missing inflation and the shocks aren't abating, and inflation expectations by market measures may be fine, but you talk to anyone out there and the level of prices is too high for too many. Inflation is front of mind, and we're getting this drumbeat of shocks where firms and households are anticipating the next shock before the last one faded. That is exactly the behavior the Federal Reserve is tasked to avert. Diane, you said something worried about breaking something if they go too far too fast. Do you think that anything in the market activity that we've gotten since the last Fed meeting was a result of the Fed rate hike or just a result of discernment among investors about the AI trade?

I don't think it was because of the Fed rate hike at all. I think it is people are starting to question what is going on. When will the cash flow turn positive enough to pay for these data centers that are now requiring even more debt that the market expected to absorb, and they're having to absorb that debt against ballooning government debt, not just in the US, abroad as well. We've got totally in the overall global economy over 360 trillion dollars in debt, public sector and private sector debt. That's a lot of debt for investors to absorb. And now they're requiring some compensation for it. And we know from research that every percentage point of debt per GDP, it's about 2.5 basis points on the long bond, on the 10-year bond. And that share has moved up from 79% to 101% in pre-pandemic to fiscal year 2026 when we had two trillion in the deficit alone.

Mr. Clarity, you own the high ground on this in your classic research work. Rick Mishkin and Colombia looked at the regret of Japan when they raised rates. We were wrong. Stop-go policy 2000-2006 at the Bank of Japan. Rick Mishkin alluded to your research here. Are we scared stiff of raising rates because we could be like Bank of Japan where we have to reverse?

I don't think so, Tom. The challenge there, of course, is that they spent two decades in deflation, and obviously that's not our challenge now. But your question does raise an important point, not just in the US but globally, with the exception of a couple countries like Germany and Switzerland. Most advanced economies have 100% of GDP or more of debt. We're in a period we're no longer in stagnation. You know, the decade before the pandemic, rates were below growth. You had negative rates in Europe. And so we really have a global repricing of sovereign risk, which is one of the reasons why bond yields are 5% now and not 1.5% as they were 15 years ago. And over time, what that...

does mean Tom is governments will have less fiscal space to deal with future downturns. That's going to put more pressure on central bank.

Just because of time, we got such wonderful guests. Then are we losing our degrees of freedom? Are we so wrapped up in a nominal GDP bubble, AI and arrest that the ECB lack of degrees of freedom, Paris, whatever the United States, name your distraction? We're just losing our suppleness in prosecuting.

I remember when we're losing that freedom, there was a phrase you used. I repeated it recently. Lisa heard it. You said an ounce of protection is worth a pound of cure. Do you remember that? Now they're hiking. Does the opposite apply? If you wait too long, do you have to do more? And how problematic is that?

Dan, let's talk about that spread. Let's wrap it up. Front end of the yield curve around 475. We're comfortably above the policy rate. We've talked a lot about this. How do you think that spread's going to resolve itself? The spread between where the policy rate is right now and where twos are priced in the market this afternoon.

Well, I hope it doesn't narrow too far and invert. Obviously, that is one of the biggest things I think the Fed wants to avoid. What I'm really worried about is that we could see more upward pressure and certainly a floor forming under the bond market in terms of bond yields. And I know that Richard's firm has a forecast of outside the box of, you know, potentially 6% on the long bond. Historically that's not high, but it is high relative to recent history and it is high relative to a lot of the debt that's been priced out there. What I'm also worried about is how much short-term debt we're rolling over now and is going to be repriced at higher rates, and that interest expense and the debt is one of the fastest growing categories, of course, of the debt right now, and that is problematic. So I'm worried about those things. I'm also worried about the fact that this is a Federal Reserve that is showing caution instead of conviction calibration. That is a little bit hard when I see over 5 years, and I don't think the shocks are going away anytime soon. And that's something that I talked about before. They're no longer episodic. They're persistent. And the idea that we're learning this drum beat and it's a rhythm that's like playing in our head that you can't get rid of, that is not what we should be seeing right now.

Dan, it's good to see you. Always is. Thank you. Dan Swanker, KPMG. Just on the long bond, I'm getting close to six. Sounds like a big number. The 30-year 20 days ago was at 573. So we came pretty close. The 30-year yield has come in some 40 basis points in the last few weeks.

Yeah, with this flight to quality because of the sell-off possibly that we have been seeing in AI. I just think it's notable if you take a look at the actual statement, which is incredibly short. Not only did they talk about how inflation is their main issue, they also said that economic activity is expanding at a strong pace, upgraded from saying expanding at a solid pace. In other words, they increased their assessment of the underlying economy, and then at the same time they said essentially the little while to figure that one out, the appropriate policy stance is there are a lot of contradictions wrapped in enigmas in this piece.

The accumulation of more information will help the committee determine the policy stands appropriate to ensure a timely return of inflation to the committee's 2% goal. Seaman December.

Well, what does timely mean? I mean, asked in the last news conference, you want a timely return to target.

Where is it? Yeah. What is, what Rich? What does timely mean?

Well, I think you have 19 opinions on the committee probably on that. But certainly inflation, especially on a core measure, falling down say below 2.5% by the end of next year and then basically down to two a year after that, would be my definition. And in fairness to the Fed, that's where we were in 2024. Core inflation was running around 2.5, and you could make a case certainly that once the tariffs work through the system we would be on that path. So I don't want to dismiss the shock story completely because there was a pretty big element of that. The question is we're about to go into 2027, core inflation is going to end the year at 3.1, 3.2, and clearly moving in the wrong direction.

News conference 7 minutes away. Stephanie Roth of Wolf Research joins us now for.

There we go. Okay, we are literally moments away now. You can see how long it took them for them to pick that up and how much of an important point that was. I'm going to do something special for three people only. Oh wow, there's a thousand people watching. So this might go fast, it might not. I don't know. But if you want to get access to those morning newsletters, those chart training course, the indicators, the sensei desk, I'll show you the sensei desk now. We put thousands of dollars and thousands of hours, or is it thousands? Yeah, probably thousands of hours into this. For example, you can just type in, let's just say we want to type in Google before their earnings. You can type that in. It pulls the institutional grade information every single time, and it gives you a synopsis of what the score is, the financials look like, the word, the compounder, the market cap, the analyst expectations, how it ranks against its peers over time, how it ranks against itself over time. It gives you explanation of the business, the peers, how it ranks against the S&P 500, and then of course all the important numbers such as revenue, the analyst page, all of that, plus the news of the day, plus the chart of the day, plus the fear and greed index, the education page with accounts, tax investor guide, the calendars, the watch list, the net worth tracker. So important to do, access to Discord, access to private events where we do all your chart requests. Remember, chart request by itself, we charge $25 for you. Just get unlimited. Oh, we do a show every single week for chart requests with all our members. You get access to Discord, you get access to the morning newsletter, you get access to our cheat sheets, you get access to our crypto newsletter on Sundays. If you want access to all of that, we're going to do something special for three people only.

Get ready. Three, two, one. It's in the live chat. If you click on that link, you get 40% off the year. We never do more than 25% on a live event. 40% is reserved for our Discord members, but I'm sure they won't mind if I share it with you guys for only three people. Three people only in the live chat. Click that link. That's the annual plan at 40% discount. Of course, you can sign up for free. There's no ads, no sponsorship. It's our own voice. We do academic research and everything. So you can click that link and you can get 40% off all of those perks. Again, I don't have time to go through all of those perks individually. There's many more than I've stated, but we are focusing on the FOMC and that's why I'm not taking a breath. A human being, Liz, I can't breathe. We've got such an important event. I don't want anyone to miss anything. So what we've done so far today, we've covered the UK budget. We've covered the US market open. We've covered the Ripple swell event. Now we're covering the... We also covered the statement where we looked at how many people voted for the rate hike. Sorry, the pause. We expected a pause. I said I'm very highly confident in a pause, and we got the pause. The next thing we looked at is how many people dissented. Two people dissented, a little bit less than expected. The market pumped, and then we got our team to send in the research and we looked at one important sentence there: economic activity is expanding at a strong pace, that was upgraded from solid pace, essentially gearing up for a rate hike in December. So what we're looking at next in three minutes' time is Kevin Walsh should take the stand and to give his assessment of it, read his statement, give his thoughts, answer the questions, and that's really where the markets move. Last time during the FOMC when the report came out, the markets went up, and then soon after the press conference started, the markets started going down. So so far the markets, the bonds, the three-year has been heading higher expecting a hike. And then when you look at something like gold, it's, if we go to the five minute time frame, you can see we've had a bit of a reaction towards a downside for some assets like gold, which don't have a yield. And if the yields are going higher and people can earn 5% free, why would they invest in something like gold is their argument.

We saw Bitcoin initially move down, trying to recover now though, trying to recover. Silver same, heading down like gold, but also trying to recover. Ethereum trying to recover. None of them are back to the heights of before the release. Maybe the S&P 500 is. No, the S&P 500 is still way below, or not that below, but still below where the, when the statement initially came out. So we're gearing up. It's actually turning a little bit green now. We're getting a bit of a pump in the market going into this rate decision press conference. So in 2 minutes' time we will be going over to the Federal Reserve to see what Kevin Walsh has to say. My personal opinions are we'll get a rate hike in December. The question is how many more rate hikes are in store in this hiking cycle? When we're looking at oil at $102, it could be way more than just one more. It could be three, four. So we'll see.

All eyes on oil, all eyes on the broader market as well. And how much inflation, not only is headline inflation, which includes food and energy, volatile aspects of the market, but how much of that goes into core, core being the more important side of inflation, which isn't just the headline shock.

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Force the guidance we received from Williams and Jefferson ahead of this decision that even though inflation was hotter than expected, very few of us expected a move from this Fed. Not just because of the moves we've seen in credit markets, though we've been notable, but because of the guidance we received from two key Fed officials when he said, 'We're not in the business anymore of providing that guidance.' When he sat on that stage and you were there looking at him in Bangkok, Thailand, who's we? Because everyone else on that committee right now seems to be in the business of providing that guidance.

I know that everyone jokes about the task forces, but I actually want to hear what the communication task force has to say. The chairman of the Federal Reserve, Kevin Walsh, at the podium following a decision to keep rates unchanged with two descents.

Thank you. Colby Smith of the New York Times. There's been essentially no progress toward the 2% inflation target. The labor market remains stable as you suggested in your opening statement and most of your colleagues seem to be on board with raising rates in December. So why not just raise rates today?

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Thank you, Chair Warsh. So if I could, this statement says that the accumulation of more information will help the committee determine the policy stance appropriate to ensure a timely return of inflation to the 2% goal. Does that mean that the current level of the Fed funds rate might already be the right one?

Mr. Chairman. Thanks for taking our questions. Before the meeting, several members of the board and the committee went out and told us that it was going to take more time and that had a profound effect on the outlook for the funds rate. Were you involved in discussing that message with them? And if you don't mind, I'm sorry, but a protocol question. What will be the public disclosure on the meetings where you're not going to have a statement? So two questions. I'm sorry.