Breitbart Business Digest: Trump Skips Warsh’s War‑Time Rhetoric as the Fed Raises Rates

Welcome back to Friday’s wrap‑up. It was Fed week, and, as most of us saw coming, the Federal Open Market Committee nudged the fed‑funds target up by a quarter of a percentage point. That’s the headline, but the story has a few more twists.

First, the Fed didn’t just touch the overnight rate. It also raised the interest‑on‑reserves (IOR) rate, the tool that helps steer banks’ lending behavior. What’s surprising, though, is that the 10‑year Treasury yield—our benchmark for mortgages and corporate debt—didn’t sprint higher. It actually drifted down a hair, closing Thursday at 4.947 %, a shade below Friday’s 4.975 %.

By Friday afternoon, as we were packing up for our weekend cabin retreat, the 10‑year was flirting with 5.00 %—still a tick under the level that the FOMC announced after the hike. The 30‑year Treasury, which seemed to dominate headlines a week or two ago, slipped from 5.354 % to 5.328 %. In plain English: long‑term rates fell a bit, even as the Fed tightened short‑term policy.

Now, the part that most readers overlook—the Summary of Economic Projections (SEP). Fed Chair Kevin Warsh isn’t a fan of the SEP; he’d rather we ignore the dot‑charts. Still, we can’t help but peek.

The long‑run fed‑funds estimate has been on a slow climb. Back in 2012, it sat at about 4.3 %; by 2019 it had sunk to roughly 2.5 %, reflecting the “secular stagnation” vibe that dominated the decade. It then plateaued—suggesting the Fed thought the neutral rate was only half a point above the 2 % inflation target.

Fast forward to this year: the estimate rose to 3.0 % in 2024, nudged up to 3.1 % in March, and hit 3.2 % at the latest meeting. In other words, the Fed now sees the neutral fed‑funds rate as about 1.2 percentage points above inflation—more than double the gap that persisted from 2019‑2024.

What does that mean for the real economy? The SEP also lifted its forecasts for GDP growth and trimmed the unemployment outlook. Core PCE inflation for 2026 is nudged up 0.1 percentage point, unchanged for 2027, and up another 0.1 point for 2028, while the long‑run inflation goal stays at 2 %.

Put together, the Fed is betting on stronger growth without a big jump in price pressures. Real GDP growth is now seen at 2.3 % this year and 2.4 % next year—slightly higher than the 2.2 %/2.3 % estimates from June. Even the 2028‑29 outlook sits above the historical 2 % trend.

Perhaps the most eye‑catching nuance: the SEP shows zero downside risk to growth, only upside risk—a first in Fed history. In short, officials are surprisingly confident the engine will keep humming.

Warsh’s own press conference echoed that confidence. He brushed off worries about a looming “Phillips curve” trade‑off, arguing that the AI boom, fresh capital spending, and a resilient labor market are offsetting any inflationary drag.

Meanwhile, the media seemed ready for a Trump‑style outburst—some even joked about a “World War Warsh.” The President stayed remarkably calm, perhaps signaling he’s comfortable with modest growth, even if it comes with a few extra basis points on rates.

Bottom line? The Fed has tightened short‑term policy, long‑term yields have edged lower, and the longer‑run outlook points to higher neutral rates and steadier growth. All the while, the political theatre remains oddly subdued.