Banks
Fed Holds Rates Under Warsh as Trump Rolls Out New Tariffs
Federal Reserve Chair Kevin Warsh presided over a closely watched two-day policy meeting this week, with markets widely expecting the Federal Open Market Committee to hold interest rates steady even as the Trump administration prepares a new round of tariffs designed to replace the “Liberation Day” duties the Supreme Court struck down as illegal.
A Hawkish Hold, With Dissent in the Room
The FOMC’s July 28–29 meeting — the fifth of eight scheduled gatherings in 2026 — was expected to end with rates unchanged, according to a consensus among Fed watchers reported by U.S. News, though not without disagreement among the twelve committee members. Warsh, who has pledged that the Fed has “no tolerance” for elevated consumer and producer costs, faces a delicate balancing act: a steady labor market and solid GDP arguably justify holding rates, while cooling oil prices — following a pause in US strikes on Iran — have taken some pressure off the inflation outlook, according to TheStreet.
Replacement Tariffs Target 60 Countries
The monetary policy decision lands alongside a parallel fiscal shock. The administration is preparing new import duties of 10% to 12.5% affecting roughly 60 countries and jurisdictions, structured explicitly as replacements for the April 2025 “Liberation Day” tariffs that were ruled illegal by the Supreme Court, according to U.S. News. Independent modelling suggests the stakes are substantial: the Tax Foundation estimates the Trump administration’s tariff programme now represents the largest US tax increase as a share of GDP since 1993, equivalent to roughly $1,500 per household in 2026, while reducing long-run US GDP by an estimated 0.4% before accounting for foreign retaliation.
The Federal Reserve held interest rates steady at its July 28–29, 2026 meeting under new Chair Kevin Warsh, as the Trump administration prepared replacement tariffs of 10–12.5% on roughly 60 countries. The Tax Foundation estimates the tariff programme costs US households about $1,500 in 2026 and cuts long-run GDP by 0.4%.
Research from the Federal Reserve Bank of New York adds a further wrinkle for policymakers: tariff-driven cost increases are still working their way through supply chains, with more pass-through to consumer prices still in the pipeline months after the initial duties took effect — a dynamic that complicates any straightforward reading of near-term inflation data.
Fed Independence Remains an Open Wound
Warsh’s tenure has been shadowed by an unusually public fight over central bank independence. President Trump has publicly needled the Fed’s board, and an active federal court case is weighing whether the administration can remove Fed Governor Lisa Cook, while a separate effort may target Governor Michael Barr, according to Kiplinger’s live coverage of the meeting. Trump has called Warsh “fantastic” while simultaneously criticising the board’s “political” members — a dynamic that leaves the new chair navigating both markets and the administration’s expectations simultaneously.
Markets Weigh Tariffs Against a Cooling Energy Shock
Treasury yields have been volatile heading into the decision: the 10-year yield touched its highest level since January 2025 amid a surge tied to Middle East risk, before easing again as oil prices tumbled on news of a pause in US-Iran hostilities, according to CNBC’s US economy tracker. Import prices, meanwhile, posted a surprise gain in July, with the cost of goods from China reaching its highest level since 2008 — an early signal of the tariff pass-through the New York Fed has flagged.
What Investors Should Watch Next
The immediate market focus shifts to the Fed’s post-meeting statement and Warsh’s press conference for any signal on the committee’s tolerance for tariff-driven price increases layered atop an already-elevated cost environment. The bigger structural question — whether markets can continue to trust the Fed’s independence from the White House amid ongoing governor-removal litigation — is unlikely to be resolved by this meeting alone, and is likely to remain a persistent overhang on long-duration Treasury yields through the rest of 2026.
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Markets & Finance
Gold at the $4,000 Line: Possible December Fed Hike
Spot gold traded around $4,020 to $4,035 an ounce on Thursday 29 October, down roughly 1% on the day, and moved briefly close to $3,983 later, according to Kitco’s live quote. Reuters reported bullion on track for a second straight monthly decline. The metal remains roughly 27-28% below its 2026 record of about $5,600, set in late January.
In Pakistan, one local market report put gold at about Rs423,436 per tola on 26 October. Tola prices also depend on the dollar-rupee rate and local premiums, so check the day’s rate.
Why Gold Is Under Pressure
A hawkish Fed hold. The Fed held rates at 3.75%-4.00% on 28 October, but Governor Lisa Cook and Cleveland Fed President Beth Hammack voted for a hike. On Thursday, Reuters reported markets pricing about a 90% chance of a December hike on the CME FedWatch tool.
Strong US data. Q3 GDP grew 3.4% and core PCE inflation rose to 2.5%, per Kitco, reinforcing the case for restrictive policy. The 10-year yield stayed near 5%.
Why this matters for gold. Gold pays no interest, so higher yields raise the opportunity cost of holding it, and a firmer dollar makes it costlier for non-US buyers. TDS strategist Bart Melek called the Fed’s stance a hawkish pause and expects gold to stay vulnerable in a $3,900-$4,250 range; Sucden Financial warned of a possible fall to $3,900.
Spot gold fell to about $4,020-4,035 an ounce on 29 October 2026 as strong US growth (3.4% in Q3) and higher core inflation kept a December Fed rate hike in play. Higher rates raise the opportunity cost of holding gold, which pays no interest.
What Could Push Gold Back Up
- A softer Fed: TDS expects the Fed to eventually turn toward its employment mandate, which could lift gold, though not immediately.
- Geopolitical shocks: Reuters quoted an analyst noting markets are wary of another spike in tensions after the 3 November US midterms.
- Oil, a double-edged factor: an oil spike raises inflation fears and hawkish expectations, which hurts gold in the short run. The same analyst said gold could post a fresh yearly low if oil revisits $120 and above.
Technical Levels Traders Watch
Kitco’s technical commentary points to $4,000 as a pivot, with downside objectives near $4,024 on a break lower and $3,986 beyond, and resistance in the $4,084-$4,146 zone. Treat these as trader reference points, not predictions.
What It Means for Pakistani Buyers
- Dollar-rupee matters as much as the gold price. If the rupee weakens, local gold can stay firm even when dollar gold falls.
- Time horizon. Analysts quoted expect volatility in a range over the coming weeks; long-term holders and short-term traders face different risks.
- Compare with alternatives. With the SBP policy rate at 12%, yield-bearing assets compete with gold for savings.
- Mind premiums and purity. Jewellery carries making charges; bars and coins track the spot price more closely.
Gold is stuck between a hawkish Fed and geopolitical risk. The $4,000 level has become the focus, and the next US inflation data and Iran’s response on the Qatari deal are the nearest catalysts.
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FED
The Fed’s 10-2 Hold: Why Two Dissenters Wanted a Rate Hike
The Federal Open Market Committee left its target range unchanged at 3.75%-4.00% on Wednesday 28 October, according to Admiral Markets’ FOMC summary. The vote was 10-2. The two dissenters, Governor Lisa Cook and Cleveland Fed President Beth Hammack, wanted to raise rates by 25 basis points. A committee that is split towards tightening rather than easing is a notable shift in tone.
The statement pointed to strong economic growth and elevated inflation. Chair Kevin Warsh said the committee held to gather more information, and he floated cutting the number of rate decisions from eight to six a year, per Trading Economics.
Why the Dissents Matter More Than the Hold
A hold was expected. The significance is the direction of dissent. Two voters wanting a hike signals that part of the committee sees inflation risks, aggravated by energy prices from the Middle East conflict, as large enough to justify tightening now. FXStreet and MUFG Research both framed the outcome as a hold with a hawkish edge, with the committee not explicitly committing to further hikes but not ruling them out.
MUFG’s read is that a December hike remains live, with more of another move priced by March. On Thursday, Reuters reported the CME FedWatch tool showing roughly a 90% chance of a December hike. That pricing, rather than the unchanged rate, is what moved currencies and precious metals around the decision.
The Inflation Problem Is an Energy Problem
The Fed’s challenge is that the inflation pressure is not purely domestic demand. Brent oil has climbed to around $115, a six-month high, as attacks on tankers and Saudi infrastructure keep supply worries alive, and Iran is weighing a Qatari draft deal that could ease or inflame the market depending on the answer. Central banks cannot lower oil prices with interest rates, but they can stop an energy shock from becoming embedded in wages and expectations, which is the argument the hawkish dissenters appear to be making.
Market Reaction
Crude oil barely moved on the decision, according to FXStreet, as traders waited on Iran’s response to the Qatari proposal. Gold slid toward $4,000 an ounce on Thursday after US Q3 growth printed at 3.4% and core PCE at 2.5%, per Kitco, with the 10-year yield near 5%.
What It Means Beyond the US
- Emerging markets: a Fed leaning hawkish tightens global financial conditions and raises the bar for easing elsewhere. Pakistan’s central bank raised its policy rate to 12% two days before the Fed meeting for domestic inflation reasons, but a firmer dollar adds pressure to the rupee.
- Gulf central banks: several Gulf central banks held rates after the decision, since their currencies are pegged to the dollar.
- Asia-Pacific: officials such as RBNZ’s governor have said another hike is plausible if inflation does not ease.
What to Watch Before December
- Inflation data: the next PCE and CPI prints will decide whether the dissenters gain allies.
- Oil: Iran’s reply on the Qatari draft, due by the end of the week, is the biggest swing factor. A deal would remove part of the hawks’ case; a breakdown would strengthen it.
- Chair Warsh’s messaging: his comments on the balance between AI-driven productivity and inflation risk.
- Labour market data ahead of the December meeting.
The Fed held, but the committee is no longer debating how fast to cut. It is debating whether to hike. Unless oil retreats, the December meeting is genuinely open.
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FED
US 10-Year Treasury Yield Near 5%: The Hidden Cost for Pakistani Investors
A US government bond can change the required return on a Pakistani investment without a single dollar physically crossing the border. The link runs through a basic idea: when a benchmark asset yields more, investors demand a stronger reason to take additional currency, liquidity and credit risks elsewhere.
The yield on the US 10-year Treasury stood near 5.00% on October 23, 2026, after reaching about 5.24% on October 9, according to historical Treasury-yield data. The user-friendly phrase above 5% should therefore be treated as a description of much of October, not a guaranteed quote for every moment of the latest trading day.
A bond yield is not a savings-account rate
A government-bond yield is the return implied by its market price and promised cash flows, assuming the relevant payment and holding assumptions. When investors sell an existing fixed-coupon bond and its price falls, its yield typically rises. That inverse relationship is central to interpreting the US Treasury market.
The 10-year yield reflects a mixture of expected short-term policy rates, expected inflation and a term premium for holding longer-dated debt. It can fall even while central-bank inflation concerns persist, for example if growth fears rise or investor demand for safe securities strengthens. Reading any single yield move as a pure Fed forecast is a mistake.
Four ways it reaches Pakistan
1. Dollar funding becomes a tougher benchmark. Investors weighing dollar-denominated assets may compare emerging-market returns with those available in US government debt. Pakistani external bonds must compensate for additional sovereign and market risk, although observed spreads change independently of benchmark yields.
2. Currency calculations shift. A domestic bond offering a high rupee yield can still disappoint a foreign investor if depreciation erodes converted returns. For Pakistani investors with future dollar obligations, currency exposure is similarly relevant.
3. Valuations face a higher discount rate. Equity valuations are sensitive to the interest rate used to discount expected future earnings. Companies promising distant profits may be more exposed than businesses generating cash immediately, but there is no perfect sector rule.
4. Sovereign refinancing risk draws scrutiny. Global debt investors assess not only current yields but also how costly it will be for governments to refinance existing obligations. Local T-bills and PIBs are nevertheless priced mainly by Pakistan-specific inflation, liquidity, central-bank policy and credit conditions; US yields do not mechanically set auction cutoffs.
The price-risk example
Imagine a fixed-coupon bond with a duration of seven years. A one-percentage-point increase in yields would imply an approximate 7% price decline, all else equal, using the basic duration approximation. That is not a prediction and not an exact valuation; convexity, yield-curve changes and cash-flow structure matter. It illustrates why holding a bond fund is different from locking in a bank deposit.
Duration risk also works in reverse: bond prices can rise when market yields fall. An investor buying only because the quoted coupon looks attractive may discover later that the resale price has moved against them.
What the latest global backdrop adds
The Federal Reserve raised its policy range to 3.75%–4.00% in September, amid persistent inflation concerns. At the same time, oil-market instability has made imported inflation a more acute concern for Pakistan. The IMF’s October World Economic Outlook forecasts 3.1% world growth for 2026 and highlights downside risks from conflict and financing strains.
This combination means bond yields may be high for reasons that are not benign. A superficially attractive yield could reflect inflation anxiety, fiscal uncertainty or a global risk premium. Investors need to ask why the yield is high, not just how high it is.
A useful comparison table
| Asset | Return quoted in | Main extra risk to examine |
|---|---|---|
| US 10-year Treasury | USD | Duration, inflation, reinvestment |
| Pakistan T-bill | PKR | Domestic rate/inflation, reinvestment |
| Pakistan Investment Bond | PKR | Duration, inflation, liquidity |
| Pakistan dollar bond | USD | Sovereign credit spread, liquidity, duration |
| PSX equity | PKR | Earnings, valuation, currency and market risk |
Currency hedging is not a free lunch
A Pakistani saver comparing foreign-currency investments with domestic government paper must think about more than headline yield. Converting rupees to dollars and back can involve spreads, banking charges, legal requirements and foreign-exchange movement. A hedging instrument, where available and suitable, usually embeds a cost related to interest-rate differences and market conditions. It cannot simply erase currency risk without consequence.
Tax treatment also matters. A quoted yield before withholding tax, custody expense or fund fees is not comparable with an after-tax return from another product. Similarly, a dollar asset can generate a positive dollar return but a different return in rupees. The investor should calculate both if future expenses are split between currencies.
For institutional portfolios, bond duration and liquidity become central. A long-maturity bond may have an attractive yield to maturity but be unsuitable for liabilities due next month. For individuals, the ability to meet an emergency expense without selling at a loss may be worth more than an extra percentage point of advertised return.
The sound comparison is liability-matched, not headline-driven: decide when the money is needed, in what currency and how much market-price movement is tolerable before selecting an asset.
Does a 5% US yield mean Pakistan must offer 5% plus a fixed margin?
No. Each instrument differs in currency, maturity, credit, liquidity and taxation; spreads vary with markets and policy.
Are US Treasuries risk-free?
They are commonly treated as a benchmark for dollar credit risk, but their market prices are not risk-free. Inflation and interest-rate changes can erode purchasing power and resale value.
What should a Pakistani retail investor do first?
List liabilities by currency and timing, then compare instruments on an after-tax, after-inflation and liquidity-adjusted basis. Seek licensed guidance where suitable.
The takeaway: a 5% US benchmark changes the world’s price of patience. Pakistani investors should respond by measuring real cash flows and risks, not by chasing whichever country advertises the biggest nominal yield.
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