{"id":434841,"date":"2026-07-28T06:16:46","date_gmt":"2026-07-27T23:16:46","guid":{"rendered":"https:\/\/www.swingfish.trade\/blog\/market-news\/fomc-preview-realized-volatility-to-come-434841\/"},"modified":"2026-07-28T06:16:46","modified_gmt":"2026-07-27T23:16:46","slug":"fomc-preview-realized-volatility-to-come","status":"publish","type":"post","link":"https:\/\/www.swingfish.trade\/blog\/market-news\/fomc-preview-realized-volatility-to-come-434841\/","title":{"rendered":"FOMC preview: Realized volatility to come"},"content":{"rendered":"<div>\n<p>The FOMC stakes are higher in the Kevin Warsh era.<\/p>\n<p>The new Fed chairman has changed the game in a way that will undoubtedly make markets more lively. The past two Fed chairs did everything they could to foreshadow rate moves in order to tamp down volatility but Warsh is headed in the opposite direction: Maximum uncertainty.<\/p>\n<p>He hasn&#8217;t been clear on why he is leaving markets so unsettled but the thinking seems to be that he wants each Fed meeting to be live, with policymakers empowered to debate and decide on the fly, once they have all the information. For this week&#8217;s meeting, that&#8217;s an especially important quirk because the PCE report is due the day after the Fed decision.<\/p>\n<p>However, officials will certainly get a preview of it before the decision, meaning they will have more info than the market. If they hike or hold, it could indicate a miss on the 3.3% core PCE reading expected.<\/p>\n<p>Moreover, the Fed is trying to forecast inflation in real time in a war that is changing by the day. Oil prices surged 30% from the lows in July but in the past two days have fallen 10%. Those kinds of swings make it extremely difficult to forecast inflation. In addition, gasoline cracks have blown out, leaving fuel prices much higher than oil would indicate, throwing a kink into the models.<\/p>\n<p>Outside of the war, the Fed is dealing with an unprecedented capex boom in AI and data centers. Normally, a trillion in spending would be a major inflationary force and would call for hikes. What&#8217;s different about this boom is that it&#8217;s so concentrated in just a few companies, with few knock-on effects. For a $10 billion data center, about $8.5 billion will go towards chipmakers, meaning the usual multipliers aren&#8217;t as effective.<\/p>\n<p>There are other reasons to be optimistic though. Last week&#8217;s initial jobless claims report fell to the lowest in 50 years at 187K. Angst about layoffs due to AI has dissipated, at least for now. The jobs market is often described as &#8216;stable&#8217; by Fed officials who are also trying to look through the effects of lower immigration, aging and deportations.<\/p>\n<\/p>\n<p>Amidst all that cloudiness, the market is pricing in:\u00a0<\/p>\n<ul>\n<li>9 bps of hikes on Wednesday, or at 36% chance of a hike<\/li>\n<li>27.7 bps for the next meeting on Sept 16<\/li>\n<li>44.2 bps for year end<\/li>\n<\/ul>\n<p>So the baseline assumption is that a hike isn&#8217;t coming this week but it&#8217;s surely coming in September. Does that mean that Warsh needs to signal a hike? I certainly wouldn&#8217;t expect that but the number of officials voting for a hike could be a hint. Remember that there is no SEP in this edition, so we will only have Warsh&#8217;s press conference and the statement.<\/p>\n<p>The risk is that a hold and a statement that isn&#8217;t explicit reads as dovish. The market remains conditioned to short-term guidance and if it&#8217;s not there, the temptation will be to downgrade September to uncertainty, which would weigh on the US dollar and front-end yields.<\/p>\n<p>On the flipside, all hell will break loose if there&#8217;s a hike and there continues to be no guidance. That would mean the market would have to price in a decent chance of a second hike in Sept and more beyond. That&#8217;s dollar positive but also an ugly scenario for stock markets, which suddenly aren&#8217;t as bullet proof as they once were.<\/p>\n<p>In short, realized volatility is the name of the game now as we find out if Warsh&#8217;s preference for uncertainty is something markets can handle.<\/p>\n<\/p>\n<p>                            This article was written by Adam Button at investinglive.com.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The FOMC stakes are higher in the Kevin Warsh era. The new Fed chairman has changed the game in a way that will undoubtedly make markets more lively. The past two Fed&hellip;<\/p>\n","protected":false},"author":216,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[86],"tags":[],"class_list":["post-434841","post","type-post","status-publish","format-standard","hentry","category-market-news"],"_links":{"self":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/434841","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/users\/216"}],"replies":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/comments?post=434841"}],"version-history":[{"count":0,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/434841\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/media?parent=434841"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/categories?post=434841"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/tags?post=434841"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}