JD Vance, the US Vice President, has called on the Federal Reserve to lower interest rates to help reduce borrowing costs and make it easier for Americans to buy homes, marking the latest pressure from the Trump administration. Meanwhile, Kevin Warsh, the Fed Chair chosen by Trump, signaled the opposite by leaving the door open for rate hikes if inflation remains high. Vance's comments come ahead of the FOMC meeting on September 15-16, where investors see the odds of a rate hike as nearly equal to no change. Michael Barr is ready to support a rate hike, while Christopher Waller is inclined to hold rates steady. This call also raises concerns about the Fed's independence, following the administration's attempt to remove Lisa Cook from her position as a Fed governor.
Vance urges rate cuts, but Fed Chair Warsh signals possible hikes, creating uncertainty; odds of a hike nearly equal to no change, so policy rate direction is ambiguous but pressure for cuts is countered by hike signals.
Rate hike possibility and Fed independence concerns weigh on bonds, likely pushing yields up (price down).
