Breitbart Business Digest: Trump Refuses to Launch World War Warsh

Welcome back to Friday’s roundup. It’s been a classic Fed‑week, with the Federal Open Market Committee doing exactly what most analysts predicted – nudging the target for the federal‑funds rate up by a quarter of a percentage point.

What caught many eyes, however, was not the headline hike but the way longer‑term yields behaved. The 10‑year Treasury, the benchmark that sets mortgage rates, actually slipped a touch, closing Thursday at 4.95% before hovering around the 5% mark on Friday. The 30‑year note, which had been the focus of late‑night market chatter, dipped from 5.35% to about 5.33%.

In other words, the Fed’s short‑term policy got tighter while the market’s long‑term borrowing costs stayed stubbornly flat – a quirk that fed (no pun intended) a lot of speculation about the future path of interest rates.

One of the more subtle takeaways from the meeting was the update to the Summary of Economic Projections (SEP). While the headline numbers get most of the press, the “long‑run” fed‑funds estimate is where the real story lives. After a long decline from roughly 4.3% in 2012 down to 2.5% by 2019 – a period many dubbed “secular stagnation” – the projection has been inching upward again.

At the most recent meeting the longer‑run rate was nudged to 3.2%, up from 3.1% in March and 3.0% the previous summer. That shift translates into a real‑rate gap of about 1.2 percentage points above the 2% inflation target – more than double the spread that the Fed held steady for several years.

Alongside the higher rate outlook, the SEP painted a brighter picture for the real economy. Median forecasts for GDP growth rose to 2.3% for this year and 2.4% for next, edging up from the 2.2%/2.3% previously projected. Unemployment expectations were trimmed, suggesting a tighter labor market ahead.

What’s particularly intriguing is that the Fed now sees upside risk to growth – the first time officials have written it that way. They’re basically saying, “if anything, the economy could surprise us on the upside.” This optimism comes despite concerns about a shrinking labor force and tighter immigration policies that many thought would dampen expansion.

Fed Chair Kevin Warsh, ever the skeptic of the SEP’s relevance, still fielded questions about the Phillips curve and the relationship between wages, inflation and output. His comments hinted that the traditional trade‑off may be fading, especially with the surge in AI‑driven investment and capital spending.

All told, the Fed’s latest guidance suggests a higher‑for‑longer rate environment, but also a belief that growth and employment can stay on an upward trajectory without igniting runaway inflation. Whether that balance holds remains the big question for policymakers and markets alike.