As expected, the Federal Reserve raised the overnight rate by 25bp (.25%). I think this was both the right move and irrelevant. Others disagree.

– The Fed cited high inflation, high spending, high employment, and solid economic growth.

– The dot plot shows 2 Governors who expect to keep the current fed funds rate through year end, 12 who expect to hike by an additional 25bp, and 4 who expect to hike by an additional 50bp by year end.

– Those who wanted the Fed to hold or cut are citing disinflation (that’s inflation but at a slower pace) and supply shocks from higher oil.

– I note that the Core CPI (all-items less food and energy) has been above the 2% target for more than half a decade. They don’t have inflation under control even backing out higher oil prices so if they’re not going to hike then they should admit the target is now 3% – 4%.

– I also don’t think it matters. Inflation (as experienced through higher prices) is continuing due to an expansion of the money supply (the true definition of inflation). That is happening because Congress overspends by trillions of dollars a year. We are funding guns (overseas military bases and wars), butter (a massive and ever-growing social safety network that incentivizes people not to work), the future (off balance sheet unrecognized liabilities for things like Social Security, Medicare, and pensions total over $200T), interest (Ponzi printing to pay for the interest on what we printed last year) and fraud (DOGE uncovered massive theft that no one in Washington DC wants to address). This is not sustainable and can’t be paid for by taxing billionaires. Like every fiat currency before it, expect continued loss of purchasing power due to inflation. Chairman Warsh, the Federal Reserve, and Secretary Bessent can’t change this.

– The bond market sees this and is pricing in higher inflation regardless of what the Fed does with the fed funds rate which is only the overnight rate. We had roughly a year of cuts and a year of holding and this is what happened to the 10-year Treasury yield. For those who want the Fed to cut to get lower mortgage rates, I want to know how. The Fed can’t cut mortgage rates and the bond market knows this.

– The financial markets have been riveted by this Fed meeting because it’s sports for finance types. Ask yourself how your life and your portfolio will be changed by banks paying .25% – .50% more for overnight deposits at the Fed. Then, I would suggest investing based on what you think will happen over the next 2, 5, 10 years.

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