'Warsh Had to Win His Credibility:' Rabobank's Foley

• Fed Chair Powell's clear, hawkish message was crucial for establishing credibility and managing inflation expectations, despite his usual preference against forward guidance.
• The US economy's potential rate insensitivity (fixed mortgages, AI sector, upper-end consumers) raises questions about how much tightening is needed to curb inflation to 2%.
• Other central banks like the BoE face similar supply-shock driven inflation, while the BoJ is trying to nurture second-order effects to avoid disinflation, making their upcoming meeting particularly interesting.

The discussion centers on the Federal Reserve's recent rate hike, emphasizing Chair Powell's need to establish credibility through a hawkish stance. It also touches on the US economy's rate insensitivity and contrasts the Fed's approach with the Bank of England's inflation challenges and the Bank of Japan's efforts to escape deflation, highlighting the data-dependent nature of monetary policy.