PodcastFed Guy (Joseph Wang)Jack Farley

September 2026 FOMC Debrief

The Fed’s projections and language pointed to a potentially higher policy path, while the speaker emphasized that further hikes were his interpretation rather than a firm commitment. Inflation risks include energy prices and repeated supply shocks, even as the Fed sees strong growth and its employment mandate as met. Markets reacted hawkishly, and discussion turned to long bonds, Treasury demand and buybacks, and signs of strain in housing affordability and the broader housing market.

Monetary PolicyInterest RatesInflationFixed IncomeMarket VolatilityReal Estate

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Key Takeaways

The speaker said the Fed’s dot plot pointed to one more hike this year and none next year, but interpreted its language as allowing at least one more hike, probably two; the 2028 median rate projection also rose 50 basis points, to 3.9%, signaling a higher-for-longer outlook in his view. Markets reacted hawkishly, with the two-year yield rising 12 basis points, the curve flattening, the dollar rallying, and stocks including small caps, the S&P, and semiconductors selling off.

The speaker said inflation was about 3.5% and largely energy-driven, and warned that rising energy prices and possible second-round effects could make inflation persistent even if the Middle Eastern disruption passes within a few months. He linked the difficulty of looking through supply shocks to repeated disruptions from the pandemic, Russia-Ukraine, tariffs, and the Middle East, against a backdrop of rate tightening by the Fed, ECB, and Bank of Japan.

The speaker disputed the Fed chair’s claim of strong productivity growth, saying official statistics did not yet show it, while allowing AI could lift productivity in the future. That contrasts with his account of the Fed’s view that growth was strong and its employment mandate met, with unemployment trending down and at about 4.1%.

TECHNOLOGY

AI Productivity — The speaker disputes the Fed chair’s claim of strong productivity growth, saying official statistics do not yet show it. He allows that AI could contribute to productivity growth in the future.

“So it's it's kind of like his canned phrase, but maybe he's thinking that we'll get that we'll get there someday due to AI, but at the moment you don't…”—

ECONOMY

Rate-Hike Outlook — The Fed’s dot plot showed a median projection for one more hike this year and no hike next year. The speaker noted that the December median leaves room for an earlier hike followed by unchanged rates. He interpreted the Fed’s language about removing accommodation as pointing to at least one more hike, probably two—not a firm Fed commitment. Equity-market weakness and lower yields, he added, could leave the Fed with just one more hike in December.

“Well, first off, there's a dot plot of course suggesting there were, you know, the dot plot is penciling median one more hike this year…”—

Fed's Labor View — The speaker says the Fed viewed growth as strong and considered its employment mandate met, citing a downward trend in unemployment and a current rate of about 4.1%.

“He suggested that growth was strong. So, the Fed is a dual mandate central bank, right? So, one is the growth was strong…”—

Energy Inflation — The speaker estimates current inflation at about 3.5%, attributing much of it to energy; excluding energy, he says inflation would be on its way to 2%. He expects the Middle Eastern disturbance could pass within a few more months. But rising energy prices and possible second-round effects could entrench inflation and make the Fed’s job harder.

“And lastly, he also explicitly mentioned geopolitical developments…”—

MARKETS

Hawkish Reaction — Markets reacted hawkishly: the two-year yield rose 12 basis points and the yield curve flattened sharply. The dollar rallied while risk assets—including small caps, the S&P, and semiconductors—sold off.

“you know, I believed that, but it was way more hawkish than I thought and the market agrees…”—

Long-Bond Hedge — Joseph Wang favors long bonds, arguing that if an equity-market decline prompts Fed cuts and a flight to safety, long bonds could benefit. He also notes that they can be held with positive carry.

“So one is that I think that we are in a tremendous tremendous equity bubble and that historically speaking when that declines Fed cuts rates there's a flight to safety…”—

TIPS Yield — The speaker says 30-year TIPS yield 3.1% in real terms, a historically high level not seen for a couple of decades. He calls the yield attractive while acknowledging he could be wrong.

“You can just think about 30-year TIPS. It's 3.1% real yield. That's that's historically quite high. You haven't seen real yields that high for I don't know a couple decades.”—

FORECASTS

Housing Bottom — The speaker says the housing market is deteriorating, with weakness spreading from lower-priced homes to the high end. If mortgage rates are around 7% and the stock market falls, he thinks the housing-market bottom may not yet have been reached.

“So in the beginning you saw a lot of the high-end real estate do pretty well as you had all these cash buyers going and buying stuff and the lower…”—

September Hike Signals

Joseph reads Powell’s language and the unanimous hike as evidence that policy remains accommodative and that additional rate increases may be needed, while stressing this is his interpretation.

Hawkish Market Reaction

The hosts discuss the selloff in risk assets, higher short-term yields, and the Fed’s rationale, including solid growth, a firm labor market, and inflation risks tied to energy.

Accommodation And Future Hikes

Joseph says Powell’s description of removing accommodation suggests rates may still be too low, but says the Fed’s next steps will depend on market conditions and incoming developments.

Dot Plot And Higher For Longer

The speakers examine an unusually dovish 2027 projection and a higher 2028 median rate, which Joseph sees as evidence of a higher neutral-rate outlook and potentially prolonged restrictive policy.

Growth And Supply Shocks

Joseph challenges the Fed chair’s claims about productivity and describes how repeated supply shocks—from the pandemic to Middle East tensions—make inflation harder for central banks to look through.

Long Bond Investment Case

Joseph favors long-duration Treasuries and TIPS, citing high real yields and potential flight-to-safety or deflationary scenarios, and says confidence in the Fed’s inflation commitment has improved.

Fed Communication And Balance Sheet

The discussion turns to Powell’s brief press conference, possible changes to Fed communications, and ways the Fed could shift toward bills as Treasury issuance shortens.

Mortgage Rates And Housing

Joseph says housing is weakening as mortgage rates exceed 7%, with weakness spreading from leveraged buyers to higher-end homes; he views affordability and rates as central factors.

Treasury Buyback Limits

Joseph explains how buybacks could reduce long-bond supply and yields, but says the Treasury’s liquidity-focused criteria and smaller-than-expected purchases have limited their market impact.

Equity Bubble Concerns

Joseph warns that elevated leverage and investors’ belief that stocks only rise make the market look like a bubble, then shares where listeners can find his work and updated book.

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Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

No Guarantees: Past performance does not predict future results; investing carries risk.

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