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* FIEND'S SUPERBEAR MARKET REPORT *

* August 19, 2026 *

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* e-mail: fiendbear@fiendbear.com *

* web address: http://www.fiendbear.com *

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Fiend Commentary
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The Minutes May Be Hawkish. The Policy Probably Won’t Be.

Wednesday’s Federal Reserve minutes may sound much tougher than the policy path that ultimately follows.

The minutes cover the July 28–29 meeting, when the Fed voted 9–3 to leave its target range at 3.50%–3.75%. Beth Hammack, Neel Kashkari and Lorie Logan dissented in favor of an immediate quarter-point increase—the largest bloc of dissenters so far under Kevin Warsh. Because Warsh has deliberately reduced forward guidance, investors will be searching the minutes for evidence that additional nonvoting officials also favored a hike.

The document may indeed reveal a larger hawkish faction than the formal vote showed.

But the minutes will also be three weeks old.

They describe a meeting held before the July employment report showed an outright job loss, before CPI and PPI came in close to or below expectations, before retail sales weakened, and before Tuesday’s housing and industrial-production reports added more evidence of a slowing economy. Markets now assign only about a 35% chance of a September hike, while a Reuters poll found that 94 of 104 economists expect no move at the next meeting and 80 expect rates to remain unchanged through year-end.

So Wednesday’s release may contain hawkish language without producing hawkish policy.

That is becoming the central feature of the Warsh Fed.

Three Dissents May Understate the Debate

The minutes will probably show vigorous disagreement over whether inflation requires another increase.

Only twelve officials vote at each meeting, but nineteen Fed governors and regional-bank presidents generally participate in the discussion. It is therefore possible that several nonvoters sympathized with the three dissenters even though their views did not appear in the final 9–3 tally.

The June minutes had already revealed an almost evenly divided institution. Many participants believed the appropriate year-end rate would be within or slightly below the current range, while many others believed it should be higher. Nearly everyone could describe a scenario supporting his or her preferred outcome: weaker employment and moderating inflation justified a hold or eventual cut, while persistent inflation caused by oil, tariffs or AI-related demand justified higher rates.

That is not a Fed with a clear policy direction.

It is a Fed carrying two scripts and waiting to see which one the next economic report allows it to read.

The July minutes may contain phrases such as “many participants,” “several participants” or “a number of participants” expressing concern that inflation remains too high. Wall Street will count those words carefully and attempt to estimate how close the committee came to a hike.

But the most important fact will remain unchanged:

The committee did not hike.

Three officials were ready to act. Nine were not.

The Dot Plot Is Balanced on One Vote

The June dot plot appeared to forecast slightly higher rates by the end of 2026 and somewhat lower rates in 2027.

The median federal-funds-rate projection was 3.8% for year-end 2026, 3.6% for 2027, and 3.4% for 2028. That has been widely interpreted as one hike this year followed by an easing move next year.

But the distribution behind that median shows how fragile the projection really was.

Eight participants projected the rate would remain near its current midpoint at the end of 2026. Nine projected a higher rate. One projected a lower rate. Because there were eighteen submissions, the published median was the average of the two middle projections. A single participant changing position could have altered the entire headline message.

That is not a strong consensus for tightening.

It is a committee divided almost perfectly down the middle.

The official projection also contains an odd implication. The Fed was prepared to raise rates modestly during the remainder of 2026, then largely reverse the move by the end of 2027.

Why hike shortly before the midterms if the increase is expected to be temporary?

The answer would have to be credibility. A hike would demonstrate that the Fed remains committed to 2% inflation and is willing to impose some pain to defend the target.

But if the Fed already expects to reverse that move in 2027, the market may interpret the increase as theater rather than the beginning of a sustained inflation campaign.

The September dot plot will be more important than Wednesday’s minutes because it will incorporate the latest employment and inflation reports. My guess is that the 2026 median will move back toward the current rate and the projected 2027 path will continue pointing sideways or lower.

The Most Likely 2026 Policy Is No Policy

My base case remains that the Fed does not raise rates in September.

It probably does not move in October either.

A December hike remains possible, but only if inflation clearly accelerates again, oil remains elevated and the labor market stops weakening. Anything less severe will allow Warsh to argue that current policy is already restrictive, the economy is slowing, and the Fed should wait for temporary supply shocks to fade.

The Reuters poll supports that view. Ninety percent of economists expect no September move, and nearly 80% expect the target range to remain unchanged through the end of 2026. The minority expecting at least one hike still greatly outnumbers those forecasting a cut, but the dominant prediction is simply more waiting.

That is very different from market pricing only a few weeks ago, when a September increase appeared nearly certain and some traders expected more than one hike before year-end.

What changed?

Not inflation returning to 2%.

The economy lost jobs in July.

CPI was merely close to expectations.

PPI did not worsen for one month.

Retail sales and housing weakened.

That was enough to transform an almost-certain hike into roughly a one-in-three possibility.

Another soft employment report could reduce the September odds close to zero. A moderate PCE report could do the same. Even a somewhat hot inflation number may be blamed on oil, tariffs or the Middle East war and therefore described as temporary.

The Fed has more ways to explain why it should wait than reasons it must act.

Warsh can continue sounding hawkish, allow the dissenters to warn about inflation and preserve December as a theoretical possibility. That helps support the dollar and keeps speculative markets from becoming even more extreme.

But talk is still not a rate hike.

2027 Is Where the Dovish Bias Reappears

The official June projections implied that rates would edge higher in 2026 and then move back toward their current level during 2027.

Private economists are now even more dovish. The median forecast in the latest Reuters poll shows the federal-funds rate remaining unchanged through the end of 2027. Economists also expect PCE inflation to remain above the Fed’s 2% target until at least 2028.

That produces an uncomfortable forecast:

Inflation remains above target for years.

The Fed does not tighten enough to force it down quickly.

The economy weakens enough to prevent additional hikes.

Rates remain high nominally, but not necessarily high enough in real terms to restore credibility.

A full year of unchanged policy is possible in 2027 if the economy avoids both recession and renewed inflation acceleration.

But I doubt that the Fed remains completely inactive through all of next year.

The more likely sequence is that the central bank holds through the remainder of 2026 and perhaps the early part of 2027. Then one of two developments forces a move.

If inflation accelerates dramatically while employment remains stable, the Fed could finally deliver a delayed hike.

If employment, private credit, housing or stocks deteriorate significantly, the first meaningful move will probably be a cut.

Of those two outcomes, the cut appears more consistent with the Fed’s institutional history.

Central banks can tolerate inflation above target for a surprisingly long time. They become much less patient when unemployment rises, credit markets freeze or asset prices begin threatening financial stability.

That is why the bond market may already be looking past the current rate-hike debate.

The Long Bond Is Pricing the Policy Failure

Treasury yields eased Tuesday, but only after reaching extraordinary levels.

The 30-year yield touched 5.327%, its highest level since 2007, before retreating to approximately 5.284%. The 10-year eased to around 4.708%. Those are still extremely high borrowing costs, particularly after several weak economic reports and a major reduction in expected Fed tightening.

The yield curve is sending a clear message.

Short-term investors increasingly believe the Fed will remain on hold.

Long-term investors are demanding more compensation because they fear what happens when the Fed remains on hold.

The 30-year yield is not primarily forecasting the September meeting. It is pricing:

• inflation remaining above target,
• almost $40 trillion of federal debt,
• enormous future Treasury issuance,
• uncertain foreign demand,
• continuing oil and geopolitical risk,
• and a central bank that may eventually ease before inflation has truly been defeated.

A hawkish set of minutes could briefly raise short-term yields and support the dollar.

It may do very little to reassure the 30-year market.

The long bond needs evidence that Washington will control deficits and that the Fed will defend the purchasing power of money over decades. A discussion showing that several officials wanted one quarter-point hike will not solve either problem.

The Fed can raise the overnight rate by 25 basis points.

That does not make $40 trillion disappear.

Tuesday’s Metals Retreat Does Not Change the Larger Signal

Gold fell about 1.1% Tuesday to roughly $4,365, while silver dropped approximately 2.8%. The immediate explanation was straightforward: long-term yields reached multi-decade highs, making non-interest-bearing metals less attractive after a strong recent rally.

That looks like consolidation, not necessarily the end of the metals recovery.

Gold and silver have remained far above the support zones near $4,000 and $60 that repeatedly held during the summer. They have also stayed relatively firm even as the 30-year yield moved above 5.3%.

That is unusual.

If investors believed the Fed was preparing a sustained tightening cycle, rising yields should be accompanied by a powerful dollar and renewed liquidation in metals.

Instead, the dollar index is hovering near multi-month lows around 99.65, while gold remains above $4,300.

The metals may be distinguishing between two kinds of higher yields.

Higher yields caused by genuine monetary discipline are bearish for gold.

Higher yields caused by inflation, deficits and loss of confidence can eventually be bullish.

Wednesday’s minutes may pressure gold and silver if the internal debate appears more hawkish than expected. But unless those words lead to an actual rate increase, the effect may not last.

The metals have already watched the September probability fall from roughly 80% to 35%.

They may be waiting for the remaining 35% to disappear.

The Minutes Are an Autopsy, Not a Forecast

Because Warsh has reduced forward guidance, Wednesday’s minutes will receive more attention than usual. Investors have fewer public clues about the chair’s thinking and will use the document to reconstruct the internal debate.

But minutes are inherently backward-looking.

They tell us what officials thought during the July meeting.

They do not tell us what those same officials think after:

• July payrolls declined,
• prior job estimates were revised lower,
• CPI and PPI were reasonably contained,
• retail sales softened,
• housing starts weakened,
• and technology stocks became more unstable.

The minutes may reveal that five, six or seven officials were sympathetic to a hike.

By September, some of those officials may have moved back into the wait-and-see camp.

That is why the employment and PCE reports will matter more than the adjective count in Wednesday’s document.

The minutes can preserve the threat of a hike.

The data will determine whether the threat survives.

What to Watch Wednesday

The most revealing language will concern three issues.

First, how many participants believed inflation was being driven by persistent demand rather than temporary supply shocks. Officials who blame tariffs, oil and the war can justify waiting. Officials who believe demand remains excessive have a stronger argument for hiking.

Second, how worried participants were about the labor market. The July statement described job gains as keeping pace with workforce growth. That description already looks outdated after the subsequent payroll report.

Third, whether officials believe the bond market has already tightened financial conditions sufficiently. Warsh has previously suggested that higher market yields can perform some of the Fed’s work. The minutes may show whether other officials agree.

If they do, it provides the perfect justification for another hold:

The Fed does not need to hike because the 30-year bond already did.

That may be convenient for policymakers.

It will be expensive for everyone financing a mortgage, corporation, commercial property or federal deficit.

My Base Case

The minutes will probably sound hawkish.

Markets may discover that more than three officials were prepared to consider a July hike.

Warsh will continue insisting that 2% inflation remains nonnegotiable.

But the probable policy path is less dramatic.

For the rest of 2026, the most likely outcome is no change. A December hike remains possible if inflation deteriorates badly, but the Fed will prefer to hold through the midterms and reassess afterward.

During 2027, the Fed will probably remain on hold initially. If the economy stays resilient and inflation remains stubborn, one delayed hike could still occur. If employment, housing, private credit or stocks weaken materially, the first major move is more likely to be a cut.

Either way, long-term yields may remain high.

A Fed hold does not solve the fiscal problem.

A Fed hike does not reopen the Strait of Hormuz.

A Fed cut does not guarantee that thirty-year investors will accept lower compensation for inflation and federal borrowing.

Wednesday’s minutes will tell us how badly the Fed wanted to look tough in July.

The 30-year Treasury is already telling us how little confidence investors have that it will remain tough when the economy weakens.

The minutes may talk about hikes.

The eventual policy is still more likely to end with a cut.

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