Will Be 'Extremely Difficult' For The FOMC To Not Raise Rates Says Richards

Will Be 'Extremely Difficult' For The FOMC To Not Raise Rates Says Richards

Bloomberg

Tue, September 15, 2026 at 10:33 PM GMT+3

Bond traders are pricing in a Federal Reserve interest-rate hike Wednesday with a level of conviction that has proven right for decades. Interest-rate swaps tied to Fed meeting dates show traders see more than a 90% chance that Fed Chairman Kevin Warsh and his colleagues will lift the benchmark policy rate by a quarter point from the current 3.5%-3.75% range. That equates to roughly 23 basis points of tightening priced in. Kitty Richards Senior Fellow at the Groundwork Collaborative joined Balance of Power saying it will be difficult for the Fed to not raise rates.

00:00 Speaker A

So Kitty, as we suggest that there may be a way to uh give these checks to Americans without affecting the deficit. What would that actually look like?

00:09 Kitty Richards

I don't think that we should take the secretary very seriously when he says that. Um, you know, first the $5,000 check is just another kind of bizarre Trump Hail Mary for this election. Um, I don't think that we are going to see uh legislation moving anytime soon to effectuate that uh attempted bribe of the populace uh to get votes. But um, you know, we are going to be talking about the bond market and the Fed and I know that Secretary Besso also made some nods toward fiscal consolidation. And you know, honestly, much like the crisis in the straight of Hormuz, the fiscal picture is very much of the president's own making. The fastest, easiest fiscal consolidation would be to repeal last year's big Republican budget bill, the OBBBA, which added $4 trillion dollars to the deficit over 10 years and more in the following decade, and that would actually have the effect of putting money back in many Americans' pockets who lost their health insurance coverage during that debate. So, I think if the president is looking for a way to make life more affordable for the American people and bring down the long-term deficit and perhaps bring down those bond rates, uh repealing his signature legislation would be a good first step.

01:35 Speaker B

Hey, Kitty, it's great to have you back. Does Kevin Warsh make a move that makes life more affordable tomorrow?

01:47 Kitty Richards

I think it's going to be extremely difficult for the FOMC to not raise rates tomorrow. We're already seeing as Kaylee mentioned, bond rates at their highest level since 2007 and uh that's already pricing in an expectation of at least a quarter point interest rate raise. I think that it will really call into question uh Kevin Warsh's credibility as a central banker if that interest rate hike doesn't happen and that could have the paradox effect of driving up those longer-term interest rates that are the things that things like mortgages are pegged to.

02:35 Speaker A

Well, so to that point, if rates could actually go higher if the Fed holds, what do you anticipate will realistically happen to rates even if they hike specifically at the long end? Is that actually something that could suppress longer-term borrowing costs?

02:51 Kitty Richards

That is the idea, right? Because the game that the Fed is playing is one of expectations and trying to communicate that they are taking inflation seriously, um, to convince the markets that they are going to do what it takes to get inflation under control over the medium term and the long-term. And so this is a credibility and expectations game as much as it is about the short-term move in the federal funds rate.

03:22 Speaker B

What should the Fed be more worried about? Persistently high or ever higher oil prices or the federal debt?

03:34 Kitty Richards

I think at the moment, what the Fed needs to be most concerned about is the impact that the war in Iran is having on the American economy and, you know, the prices that people are paying at the pump and also all through the economy. You know, as we saw in COVID, when you get these supply chain uh crises, they really ripple through um and drive prices higher. And unfortunately, there's not a lot the Fed can do about what's going on in the straight of Hormuz. There is a lot that the Trump administration can do about that. Um there's less that they can do about borrowing costs if they are not willing to take on uh the big driver of inflation at the moment.

04:31 Speaker A

Well, and so if that is the Middle East, which is pushing energy prices higher and diesel, which as you mentioned is at a record, there is a a conversation happening as to whether or not a diesel export ban should be under consideration here in the US. The interior secretary, Doug Burgum, uh last week told me that it and other options are on the table. And interestingly, the Senate majority leader John Thune today said he's open to considering that if it will bring prices down. Is that necessarily the effect a diesel export ban would have, Kitty?

05:07 Kitty Richards

I think that these uh ideas of, you know, releasing more oil from the strategic oil reserve, although we have released a lot and that is um, you know, has been depleted significantly or export bans, um they're all kind of appealing band-aid fixes, but oil is traded on a global commodity market. And if you end up um, you know, with slightly more supply here in the United States, you're not going to be able to wash out the major effect of what's going on in the Middle East. And remember it's not just oil, it's natural gas, it's um other petroleum products, uh it's shipping. So I don't think that that is going to be a fix for um the prices that Americans are paying.

06:17 Speaker B

We talk to your buddy Peter Navarro from time to time here on balance of power. Uh Kitty Richards, and he was strident in his most recent appearance to say that hiking interest rates during an energy crisis is the wrong move because of the way interest rates work here and wouldn't have any impact on actual energy prices. Does he have a point? And by extension, does this end up being the start of a recession?

06:52 Kitty Richards

Look, we had this same conversation in many ways during the Covid crisis where we had really supply chain driven inflation, um that needed to work its way through the system. And uh at that point, folks like Navarro were very interested in the Fed taking a more hawkish approach to interest rates. I do think that the Fed's being put in a really, really difficult position by the Trump administration both because of the war in Iran and because of the tariff chaos that is also driving prices up. So we have a lot of self-inflicted wounds that the Fed is then trying to patch with band-aids. But, you know, as you say, these rate hikes do have real negative effects on um people's pocketbooks. You know, credit card interest rates go up, um car loan rates go up, mortgage rates go up. Though again, with what's going on in the bond market, it's a little more complicated than that.

08:08 Speaker A

And finally Kitty, in our final minute, we should know you weren't just an official at the Treasury department. You were actually the director of the state and local fiscal recovery funds that were authorized in the American rescue plan. Obviously, stimulus checks went out as part of that. What was different about that compared to $5,000 checks the president says he will send out because Republicans have raised this. He's not the only president who has suggested sending money to Americans.

08:35 Kitty Richards

Sure. So, remember that the the checks in the American Rescue Plan Act were in the depths of the Covid crisis when many, many people were involuntarily unemployed and we were really concerned that folks were going to be going hungry. They were going to be um unable to purchase things in the market and then other people were going to lose their jobs. The sort of classic dynamic of a recession. Right now we're facing high interest rates, um high uh inflation and it's just a really different scenario.