Sep 17, 2026 · 20 min
The Fed reasserts control as markets question higher yields
News alert: Fed acts normal
The episode connects a politically pressured rate decision to inflation, bond-market credibility, fiscal concerns, and climate-driven food risk.
- 1The Fed’s quarter-point hike signals a return to inflation-focused policy despite pressure from Donald Trump.
- 2A hawkish outlook and competing demands for capital are pushing Treasury yields higher, though crowded trades could reverse.
- 3Climate damage to potato supplies and alleged Russian funding tied to Donald Trump Jr.’s wedding broaden the episode’s stakes.
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The hosts argue that the rate hike functions as a declaration that the Federal Reserve, rather than the president, controls monetary policy.
The brief
Katie Martin and Robert Armstrong frame the Federal Reserve’s unanimous quarter-point hike as a return to conventional inflation-fighting policy, despite Donald Trump’s demands for lower rates.
The Fed’s projections point to another increase, while Kevin Warsh’s opposition to forward guidance raises questions about how firmly policymakers are signaling their intentions.
Higher Treasury yields reflect more than the rate decision: the hosts weigh inflation, government spending, corporate borrowing, competition for capital, and geopolitical risk.
The political pressure appears to have lost force as markets treat the Federal Reserve as independent, but yields could still rise if fiscal policy, debt issuance, or the AI boom sustain demand for capital.
The closing Long Short segment links a European heat wave to damaged potato supplies, then turns to a ProPublica investigation into alleged Russian funding around Donald Trump Jr.’s wedding events.
What was said on this episode
17 statements · 7 positive · 10 negative
The Federal Reserve raised interest rates because US inflation was too high.
“US inflation is too high and the Federal Reserve has done the normal thing that normal central banks do when inflation is too high and raised interest rates for you.”
Listen at 0:05
The FOMC raised interest rates by 0.25 percentage points.
“The Federal Reserve Open Market Committee decided to raise interest rates by a quarter of a percentage point for the first time in several years.”
Listen at 1:59
The FOMC unanimously approved the quarter-point rate increase.
“the committee voted unanimously to do so”
Listen at 2:11
The Fed’s rate increase was hawkish.
“So this was not only an increase, it was a hawkish increase.”
Listen at 3:33
Kevin Warsh believes central banks should not disclose their next policy move.
“Kevin Warsh's view is you should never say anything about your next move.”
Listen at 3:49
The Fed’s dot plot may have helped Warsh send a firm market message.
“The dot plot, which he hates, may have helped him do that.”
Listen at 5:11
The rate hike was economically justified.
“the hike made sense just on the economics.”
Listen at 6:43
The Fed targets 2% PCE inflation, while current inflation remains above target.
“The target is PCE, and the number they want is 2.0%. And we're at three point something, and that won't do.”
Listen at 8:47
The ten-year Treasury yield fell below 5% after the meeting.
“we are back below 5%, 4.949, it says here on my screen, and falling.”
Listen at 10:49
Higher Treasury yields reflect inflation, government spending, and Federal Reserve credibility concerns.
“the answer is, yes, it's all of those things.”
Listen at 12:09
Trump’s attempt to pressure Powell failed.
“A hundred percent. He tried it on with Powell and he failed.”
Listen at 15:13
Trump’s remaining political influence will diminish as his term nears its end.
“he's out the door in two years and everybody knows it. The guy's a wasting asset.”
Listen at 15:33
Ten-year Treasury yields may rise further rather than having peaked.
“I don't see any reason this has to be the top. It could be.”
Listen at 16:42
Forces that raised ten-year yields toward 5% remain active.
“all the forces that have pushed 10-year yields as far as they have come up to the line of five. Those forces are still in play.”
Listen at 16:47
Higher short-term rates should cool economic activity and lower long-term rates.
“Higher short-term rates should cool the economy at the margin, and that brings long-term rates down.”
Listen at 17:36
A European heat wave destroyed 3.1 million tons of potatoes.
“because of the heat wave in Europe, 3.1 million tons of potatoes were wiped out.”
Listen at 18:25
Potato crop losses should increase public focus on global warming.
“if this attack on the potato doesn't get people focused on global warming, I don't know what will.”
Listen at 18:46
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.