Higher Rates 'Cannot Manufacture' Oil or Reverse Tariffs: James Thorne Says Fed Eyeing Another Hike a 'Misdiagnosis'
The Federal Reserve is leaning toward another interest rate hike by year-end, but market strategist James Thorne said the central bank is misdiagnosing an economy that isn’t overheating, while Treasury yields climb to fresh highs. Fed Is Fighting Overheating That Isn’t There Thorne, the Chief Market Strategist at Wellington Altus, called the case for a hike “not prudence” but “misdiagnosis.” “Housing is in recession. Inflation expectations remain anchored,” he said, adding that recent trimmed-mean personal consumption expenditures (PCE) inflation and two-year breakevens are lower than when President Donald Trump took office. “Where is the overheating?” he asked. Thorne compared it with September 2024, when the Fed cut rates by 50 basis points with trimmed-mean PCE at 3.25%, well above today’s 2.1%. “Why did flexibility then become restraint now?” he questioned, adding that higher rates “cannot manufacture oil, reverse tariffs, or expand capacity. Bessent Gets What the Fed’s Echo Chamber Misses The Keynesian echo chamber is preparing its excuses. The Warsh Fed’s policy mistake will become "risk management." Expect elaborate rationalizations and little engagement with the facts. This
The Federal Reserve is leaning toward another interest rate hike by year-end, but market strategist James Thorne said the central bank is misdiagnosing an economy that isn’t overheating, while Treasury yields climb to fresh highs. ” “Housing is in recession. Inflation expectations remain anchored,” he said, adding that recent trimmed-mean personal consumption expenditures (PCE) inflation and two-year breakevens are lower than when President Donald Trump took office. ” he asked.
1%. ” he questioned, adding that higher rates “cannot manufacture oil, reverse tariffs, or expand capacity. Bessent Gets What the Fed’s Echo Chamber Misses The Keynesian echo chamber is preparing its excuses. " Expect elaborate rationalizations and little engagement with the facts.
This is not prudence. … — James E. ” One thing I find interesting is that there’s a widespread narrative out there that real rates are rising in part because the US economy is running hot. It seems plausible, except that (aside from the strong PMIs) I don’t see much evidence of it in the chart below.
com/EswG1ltZG5 — Jurrien Timmer (@TimmerFidelity) October 7, 2026 He blamed fiscal risk and crowding out. ” The Fed is in a bind because the markets are demanding rate hikes, but those hikes will have a disparate impact on borrowers. The Government cares about rising rates but they can always kick the can down the road (if markets let them). com/TlP3zUACID — Jurrien Timmer (@TimmerFidelity) October 7, 2026 Fed Minutes Point to Another Hike By Year-End Minutes of the Sept.
5% expect a hike in December. 32% on Wednesday, its highest since 2002. 70%, a 24-year high. 5%,” pushing mortgage rates above 8%.
5%, pushing mortgage rates above 8%. 8 trillion in mortgages with just $194 billion in capital. 7% loss to wipe it out. Instead of launching an IPO, Trump will be arranging another federal bailout.
— Peter Schiff (@PeterSchiff) October 7, 2026 On a $500,000 home with 10% down, he said the monthly payment is about $1,900 at a 3% rate but would top $3,600 at 9%. Prices would have to fall nearly 50% to bring the payment back down, he added. When mortgage rates were 3%, the monthly payment on a $500K house with 10% down was about $1,900. When rates rise to 9% next year, the same mortgage will cost over $3,600.
At that rate, to reduce the payment to $1,900, the price of the house would have to fall by nearly 50%. 14 in extended trading. 14% in extended trading. edge rankings indicate the iShares 7-10 Year Treasury Bond ETF has a Momentum score in the 26th percentile with negative price trends in the short, medium, and long term.
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