Minneapolis Fed President Neel Kashkari told CNBC that the labor market remains in decent shape, removing one of the main arguments for near-term rate cuts and placing inflation squarely back as the Fed's dominant concern. He warned that if inflation expectations become entrenched in consumer behavior, the Fed would be forced into more aggressive tightening later, a significantly more disruptive outcome than acting sooner.
For Armada's traditional repo desk, Kashkari's comments compound the Warsh-hawk dynamic. Persistent SOFR elevation affects the cost and attractiveness of term repo facilities offered to hedge fund and asset manager counterparties. MMF counterparties in particular will recalibrate overnight versus term allocation if rate-cut expectations are pushed further out.