Fed Chair Kevin Warsh and the FOMC Just Fired a Warning Shot at the Second-Priciest Stock Market in History

On Sept. 16, Fed Chair Kevin Warsh and 11 other voting FOMC members unanimously raised the federal funds rate by 25 basis points to 3.75%-4.00%, the fourth time this century the central bank has started a rate-hiking cycle. Persistent inflation drove the move: August was the 66th consecutive month with annualized inflation above the 2% target, and the minutes cited tariffs, the Iran war and AI infrastructure spending as key sources. Most participants saw another rate increase by year-end as likely appropriate. The article argues this is a risk for a historically expensive stock market, noting that the S&P 500's Shiller P/E came close in June to the highest level in 156 years, reached just before the dot-com bubble burst, and that higher borrowing costs could slow AI expansion partly financed with debt.

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