Fed Hawks Are On The War Path, Sending Mortgage Rates Higher

Today the 10-year yield hit a yearly high of 4.74% and mortgage rates rose six basis points to 6.83% (as of this writing), as all the Federal Reserve hawks came out to play, and they were not taking a page from Fed Chair Kevin Warsh’s playbook. They want their voices heard loud and clear — and they really want multiple rate hikes. 

Also, we got more conflict news this morning as Iran shot missiles at U.S. bases and tankers, while Trump discussed possibly blocking land transportation in Iran. 

While Kevin Warsh is playing with his new task force, other Fed members are running the show, so the markets will get questions from them. Let’s take a look at statements from the three hawks driving the higher-rate agenda at the Fed.

Beth Hammack, president of the Cleveland Fed

In a statement today, Hammack, whom I am going to call Fed Chairwoman for now, said this:

“I preferred to move at our recent meeting because I did not see the current policy stance as appropriately restrictive.”

“Given the stability of the labor market, with the unemployment rate near my estimate of maximum employment, I view high inflation as the more pressing problem.”

Hammack doesn’t want one rate hike, she wants to take back all three from last year — the “insurance cuts” as Powell once labeled them. She was never a big believer of the rate cuts last year, so this isn’t a shock at all.

Neil Kashkari, president of the Minneapolis Fed

Kashkari, whom I believe also wants three rate hikes on a managerial basis, isn’t a surprising hawk as he already told the market he had penciled in one rate hike for 2026. He wants a more gradual approach to the rate hikes. However, what he needs is to get four more Fed voters to join in for this rate hike.

In his statement, he said:

“To manage against the risk that high inflation could become entrenched, I would rather tighten policy incrementally as we gather more data on the path of inflation and employment. If inflation remains elevated, in my view, a potential series of small policy moves would be better than waiting and eventually concluding that even bolder actions were necessary.”

Lorie Logan, president of the Dallas Fed

Logan has always been a hawk. She truly believes policy isn’t restrictive enough to get back to 2% with the current inflationary pressures. From her statement:

“Inflation does not appear to be on course to sustainably achieve the Federal Open Market Committee’s 2 percent target. More than five years after the post-pandemic surge, prices have continued to rise too rapidly. Every month of above-target inflation compounds the strain on the budgets of American families and businesses.”

The role of the Iran conflict

None of these Fed presidents are fans of the conflict on Iran and the inflationary pressure that has occurred. However, none said anything when oil prices were below $70, except Hammack said lower oil prices could be a problem for inflation because people wouldhave more to spend. Currently, oil is over  $84.

It’s not a shock that we heard from all the hawks today. Hammack doesn’t believe policy is restrictive enough, but she hasn’t believed it for the last 18 months. Kashkari is more about taking back Powell’s “insurance cuts” and managing the situation with rate hikes. Logan believes inflation is nowhere near  staying close to the 2% target with where policy is at.

Happy Fed war hawk party.