The Fed’s silent treatment
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What is the main topic discussed in this episode?
Pushkin.
Is the US-Iran conflict reigniting and how is it affecting oil prices?
It looks like the US war with Iran is back on. The US is dropping bombs on Iranian infrastructure and Iran has been firing on commercial shipping in the Strait of Hormuz. Here we go again. Donald Trump has declared that as far as he's concerned, the ceasefire is over. Now markets are a bit spooked. Oil is up about $80 a barrel. It's not like March, but the question is... Is this enough to push inflation up and force the new chair of the Federal Reserve, Kevin Walsh, to raise interest rates after all? Today on the show, it's war and Walsh. This is Unhedged, the markets and finance podcast from the Financial Times. I'm Pushkin. I'm Katie Martin, a markets columnist at the FT in London. Joining me down the line from Brooklyn, New York, is Rob Armstrong of the Unhedged newsletter.
Rob, who are you supporting in the football now that the US is out?
the Britain soccer cats out of allegiance to UKD. I have a lot of friends over there. And because of that, I'm rooting. I'm hoping that it comes home briefly before it goes back to France.
OK, good. Thanks. Thank you for your service. So, God, war again. Really? Why? What's going on?
Well, I think, you know, we now have learned that Trump announcing that the ceasefire is over. Tells you that the ceasefire is over right now on Thursday at 9.46 a.m. Eastern Time. But it doesn't tell you very much about whether the ceasefire will be over on Friday. Even saying that, the fact that missiles are being shot and... shipping is being disrupted has to change your calculus of the situation, even acknowledging that it could all be different tomorrow. So it matters.
Could higher oil and shipping disruptions push US inflation and interest rates up?
And look, oil is telling you that it matters some, you know, we had a whatever 5% raise, a 5% increase in the price of Brent yesterday. And that shows you that despite the vicissitudes of this conflict, you have to take it seriously when the missiles start to fly again.
Yeah, I mean, cynics were saying right from the start that the ceasefire wasn't worth the paper it was written on, if indeed it was ever written on any paper in the first place. So it's not a huge surprise. But so there's a few interesting things going on here. As you say, oil is back up about $80 a barrel. It was getting close to about $70. So, you know, we've had a decent move. higher and one of the things that happened earlier this week was when when this all kicked off again is the government bonds took a knock again because as listeners to this show well know when you get higher oil prices all things equal you get higher inflation bonds really don't like inflation so that pushes the price down and it pushes the yield up and it pushes borrowing costs up for everybody and it's generally bad
And we've had another flicker of that over the past few days. And that kind of collides with another big market event that we've had this week, which is the minutes from the first meeting of the Federal Reserve under the new chair, Kevin Walsh. And we'll come on to the details of that in a minute. What investors are saying, to me at least, is, OK, we understand that Kevin Walsh wants to say less. Like, arguably, we should all say less. You and I should possibly shut up.
But Kevin Walsh. People have been saying this to me for some years now, Katie.
One of the things people say to me about why they like this show is that it's short. Make of that what you will.
The food's lousy, but at least the portions are small.
So Kevin Walsh likes saying less, all power to his elbow. But one of the things that that means is that investors kind of don't know how to read him and they don't know how to read the Fed. And they don't know whether... this kind of pop higher in oil prices means they need to think again about what they think the Federal Reserve is going to do next, whether it needs to raise interest rates. So we're just sort of in this sort of soup of confusion and trying to double guess what the Fed does.
Well, take a step back, because I believe and I think a lot of people believe that for Kevin Warsh, The confusion and the volatility is somewhat the point.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:06–0:09
2
Is the US-Iran conflict reigniting and how is it affecting oil prices?
0:09–2:10
3
Could higher oil and shipping disruptions push US inflation and interest rates up?
2:10–14:43
4
What does the new Fed chair Kevin Warsh’s silence mean for markets?
14:43–21:35