Claudia Sahm Talks Fed Minutes, Inflation Gauge

Summary

Podcast Summary: Claudia Sahm Talks Fed Minutes, Inflation Gauge

Podcast: Bloomberg Talks
Host: Bloomberg
Guest: Claudia Sahm, New Century Advisors
Date: July 9, 2026

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Episode Overview

This episode addresses the latest Federal Open Market Committee (FOMC) meeting minutes, focusing on the shifting stance of the Federal Reserve regarding interest rates and inflation. Claudia Sahm, an economist with deep Federal Reserve experience, interprets key signals from the minutes, discusses the policy implications of ongoing global events (notably the Middle East situation), and explores the Fed’s current reaction function to inflationary pressures.

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Key Discussion Points & Insights

1. A "Low Information Chair" But a "High Information Fed"

Timestamp: 00:52 – 01:20

• Context: Chair Kevin Walsh did not submit his personal rate forecast, described as a "low information chair," but the FOMC minutes themselves were highly revealing.

• Claudia Sahm's take:

  “We got finally some answers or at least some details... The Fed's reaction function is alive and well."
  (D, 01:20)

• Substance of Minutes:

  • The Fed is clear about the conditions under which it would raise rates.
  • The outlook for inflation is central: the Fed wants to see inflation moving back toward 2% soon and shows impatience for progress.

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2. Triggers for Future Rate Hikes & Focus on Inflation

Timestamp: 01:45 – 03:01

• Multiple Potential Triggers:

  • The Fed is not focusing solely on the sources of inflation—whether AI, geopolitical events, or tariffs, any persistent elevation in inflation is concerning.

  "It did not discriminate on the source of that inflation... anything that keeps inflation high and doesn't start moving it soon to 2% would be enough."
  (D, 02:04)

• Consensus on Inflation:

  • If inflation does not begin to fall soon, there is broad agreement among FOMC members to raise rates.

• Notable Quote:

  “... you do get a sense of some impatience like they want to see it soon. This is not like we're waiting till 2028 to see inflation moving down.”
  (D, 02:28)

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3. The Committee’s Evolving Stance: From Tapering Easing to Considering Hikes

Timestamp: 03:01 – 04:11

• Big Shift:

  • Not only has the Fed moved away from an easing bias, but no members are considering rate cuts in the near term.
  • Split is between holding steady and hiking, not doves vs. hawks.

• Impact of Geopolitical Events:

  • “Events in the Middle East were a big shift in terms of the Fed's thinking... just as tariffs are rolling off, we are hit with another major cost shock.”
    (D, 03:28)

  • The Fed now reacts nimbly to global cost shocks, similar to other central banks.

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4. Market Expectations and the Fed’s Approach

Timestamp: 04:11 – 05:12

• Market Pricing:

  • Only about a 25% chance is being priced in for a July rate hike.

• Claudia’s Perspective:

  • “The meetings are live. I think the runway to a July interest rate increase is pretty short. But, but by the fall, you know, they're going to get more CPI prints... So I think something would be more likely happen in the fall in terms of a rate increase.”
    (D, 04:37)

  • The Fed acts on real-time data and doesn’t wait passively for internal reports (task forces).

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5. Unusual Prospects of a ‘One and Done’ Rate Hike

Timestamp: 05:12 – 06:03

• Historical Context:

  • Normally, rate hikes or cuts come in sequences, not single moves.

• Claudia’s Insight:

  • “Going one, one and done is unusual, but you know, we live in unusual times. I don't want to take it off the table.”
    (D, 05:29)

  • It is possible, particularly if events (like further geopolitical shocks or inflation surprises) change quickly and resolve just as quickly.

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Notable Quotes & Memorable Moments

• On impatience and urgency:

  “You do get a sense of some impatience like they want to see it soon. This is not like we're waiting till 2028 to see inflation moving down.”
  (D, 02:28)

• On shifting Fed dynamics:

  "Events in the Middle East really were a big shift in terms of the Fed's thinking. It's not so much that we have an energy shock... we have another cost shock."
  (D, 03:28)

• On the possibility of a single hike:

  “Going one, one and done is unusual, but you know, we live in unusual times.”
  (D, 05:29)

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Timestamps for Important Segments

• Fed’s reaction function and impatience over inflation: 01:20 – 02:28
• Shift from easing bias to hike/hold split: 03:01 – 03:28
• Impact of Middle East events and global shocks: 03:28 – 04:11
• Likelihood and timing of a rate hike: 04:11 – 04:37, 04:37 – 05:12
• Discussion of potential for a single rate hike: 05:12 – 06:03

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Tone and Takeaways

The episode strikes a tone of close, practical analysis. Claudia Sahm, drawing on her Fed experience, underscores both the urgency and uncertainty facing policymakers. The discussion reflects the global interconnectedness of inflation risks and highlights how the new Fed leadership may be more reactive and flexible, though still data-driven. The overall message: the Fed is not dragging its feet but is ready to act swiftly as new data and events unfold, with the inflation outlook as the guiding star.

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Summary Table

| Segment | Topic | Speaker | Timestamp | |------------------------------------- |---------------------------------------------------|-----------|--------------| | Fed reaction function & impatience | High info Fed, urgency on inflation | Claudia | 01:20–02:28 | | Shift to hike/hold stance | No cuts, only holding or hiking | Claudia | 03:01–03:28 | | Middle East/global shocks | Quick policy shifts, interconnectedness | Claudia | 03:28–04:11 | | Probability of a July hike | Market outlook, near-term and fall expectations | Claudia | 04:11–05:12 | | One and done rate hike? | Historical context, flexibility | Claudia | 05:12–06:03 |

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For listeners:
This episode is essential for those tracking Fed policy, inflation trajectories, and the impact of world events on US monetary policy. Claudia Sahm’s grounded explanations provide clarity amidst global uncertainty.

Transcript

[A]

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[B]

Bloomberg Audio Studios Podcasts Radio News so here's the latest this morning.

[C]

FOMC meeting minutes revealing several policymakers saw a case for raising interest rates, with nine officials anticipating at least one hike this year. Fed Chair Kevin Walsh declining to submit his rate forecast. Claudia Sam of New Century Advisors writing, we have a low information chair, but not a low information Fed. Claudia joins us now for more. Claudia, welcome. Well framed. Appreciate that. What have we learned from a high information Federal Reserve, even if we have a low information Fed chair?

[D]

Right. So we got the minutes yesterday and we got finally some answers or at least some details to this question of what will it take for the Fed to raise interest rates. The Fed's reaction function is alive and well. We had to wait three weeks to hear anything about it. But the minutes really did deliver on the substance of what those rate hikes would take and they put it out in scenarios and it very much goes back to the inflation outlook, Claudia.

[C]

That includes the spending and that came up a few times in the minutes. If you just bring up the PDF and search for air, you'll see it mentioned several times. Given the move we've just had in energy in the last 24 hours, how fine are the margins, Claudia, separating a hold from a hike? And could a renewal of tensions in the Middle east tip it one way versus the other?

[D]

Right. So the scenario for a hike is one where inflation stays elevated. And one thing that was very striking in that scenario was it did not discriminate on the source of that inflation. Right. They mentioned AI, they mentioned the Middle east, they mentioned tariffs. So really it's anything that keeps inflation high and doesn't start moving it soon to 2% would be enough. And there was a lot of agreement if that were to happen. Most of the or almost all of the participants said they would raise rates. So I think that's where we're just looking for, you know, inflation to start moving, moving back towards 2%. And you do get a sense of some impatience like they want to see it soon. This is not like we're waiting till 2028 to see inflation moving down. So I think that's important and it does bring the focus back to the inflation data. It's not a Fed that is divided in how we react to inflation. They're divided in what's coming next with inflation.

[B]

Claudia, are you surprised by how big a shift it was from simply dropping the easing bias to no one anticipating rate cuts anytime soon? The idea that it's not as if this committee is split between people who think that there should be rate cuts and rate hikes. The committee is split, as John was saying, between people who are going to stay on hold and hike rates. This is no one being a particular dove is that surprising in terms of the pace of that shift.

[D]

The, you know, events in the Middle east really were a big shift in terms of the Fed's thinking. And it's not so much that we have an energy shock. I think it's also that we have another cost shock. Last year we had tariffs and the Fed was very patient. We're going to look through this. We're going to wait and see it happen. And just as tariffs are rolling off, we are hit with another major caused shock to push up inflation. So it's the events really shifted early this spring. And I think this is a good example of the Fed can shift pretty quickly as events shift. You know, this is very much a data driven, this is very much a reality driven. And you're seeing it not just at the Fed. Other central banks are reacting in a similar way because it is a global shock we are reacting to right now.

[B]

People are pricing in about a quarter percent chance, 25% chance that there will be a rate hike at the meeting later this month for the Federal Reserve. I just wonder which side of the camp, which camp you're in right now. The people who believe that the Fed kind of bought itself some time by having these task forces to go through some of the metrics versus a Fed that truly could be live even as soon as in a couple of weeks time.

[D]

So the meetings are live. I think the Runway to a July interest rate increase is pretty short. But, but by the fall, you know, they're going to get more CPI prints, they're going to get more information on inflation, more information on events happening. So I think something would be more likely happen in the fall in terms of a rate increase and what was clear in the minutes. I mean, this is a Fed that is combing through the data. They're discussing how to react to it. They're not waiting for the task forces to come back and enlighten them. They will get that information. But that, that's not what is kind of determining when the Fed acts next.

[C]

Claudia, you've worked at the Fed. We often talk about your experience there. Looking back, it's unusual just to hike once. Usually we're thinking about a series of hikes. Do you think under this new Fed, with new leadership, you could get a one off hike? Just a single 25 basis might move and then wait and see

[D]

there. You could imagine a scenario, but it would have to do with events are shifting rapidly. That would make the hike, you know, another hike not necessary. I think, you know, a model of something like we saw last fall where there were a series of, you know, 25 basis point cuts to deal with downside risk to employment. You might see a flip side of that. That is a, a series of 20, 25 basis point increases to deal with upside risk to inflation. You know, going one, one and done is unusual, but you know, we live in unusual times. I don't want to take it off the table.

[C]

Claudia, it's good to see you as always. Appreciate your reaction, Claudia. Sam, that of New Century advises.

[E]

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