Warsh is right – the economy is robust.

Many aspects are strengthening.

Some are weakening.

But the economy is resilient & dynamic.

Within that resilient & dynamic environment, inflation has consistently decelerating when excluding energy.

The Fed can't control that.

Hiking here won't impact energy-specific inflation.

It will only raise the risk of hurting the labor market and the consumer.

Thankfully, my view is that the labor market and consumer will continue to be resilient & dynamic – that they'll be able to absorb moderately higher rates at a slow pace.

Still, it's an unnecessary risk given the lack of impact that this hike (or future hikes) will have on CPI inflation.

This hike represents a fold.

Warsh just caved to the bond market's pressure, which is being impacted predominantly by Treasury operations & rising crude oil prices.

But he also caved to the media's pressure.

Last FOMC press conference, Warsh was pushed (repeatedly) on his credibility and the credibility of the Fed itself.

That doubt fueled the narrative.

And that narrative fueled the policy adjustment.

Warsh's only valid option today, in my opinion, was to give a middle finger to both the Treasury market and the media.

That could only be accomplished in two ways:

1. To cut interest rates by 0.25%

2. To raise interest rates by 0.5%

The market/media will now be emboldened...

Warsh's Fed can be controlled.

Manipulated.

I really hope this isn't a policy mistake.

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