Bloomberg Surveillance · Wednesday, August 26, 2026
Marvin Lowe of State Street discusses the Federal Reserve's approach, noting that while data provides room for consideration, a significant portion of the committee still favors hiking rates. He suggests that the Fed's reaction function and the new chairman's approach are key to market comfort, especially after the July decision. The concern of embedded inflation, particularly in the services sector, remains a significant risk for the Fed.
“We're not going to hear from him with regard to what he thinks September is going to look like or even December is going to look like. All we can hope for is that we get a little bit more sense into what his thinking is, how the Fed's going to actually approach the concept of the reaction function, and really to give the market a little bit more comfort that July is not the way the Fed operates and not the way the new chairman operates.”
“But you continue to have half of the committee that thinks that there is a fairly low hurdle with which they should hike rates. And I think that that winds up being the theme that we take into the latter part of this year.”
“After five plus years of this kind of embedded inflation, that is the concern of the Fed. Forward guidance and forward expectations around inflation is ultimately the self-fulfilling prophecy.”