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Markets are set for a much more hawkish Warsh Fed than expected

Fed Chair Kevin Warsh has prioritized the 2% inflation target, signaling a tougher stance than markets anticipated. New projections show increased inflation and interest rate forecasts through 2027. The U.S. dollar has reached a 13-month high as investors bet on further rate hikes.

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What changed

Updated projections now show higher inflation forecasts and a significant increase in the probability of rate hikes over cuts.

Live updates

  1. Fed Chair Kevin Warsh Signals Hawkish Pivot as Inflation Forecasts Rise

    Fed Chair Kevin Warsh has prioritized the 2% inflation target, signaling a tougher stance than markets anticipated. New projections show increased inflation and interest rate forecasts through 2027. The U.S. dollar has reached a 13-month high as investors bet on further rate hikes.

    What's confirmed:

    • The Federal Reserve's inflation forecast rose from 2.7% to 3.6%.
    • Core inflation expectations increased from 2.7% to 3.3%.
    • The expected policy rate for 2026 was raised from 3.4% to 3.8%.
    • The 2027 policy rate projection increased from 3.1% to 3.6%.
    • Nine of 18 voting members expect another rate hike this year.
    • The U.S. dollar reached its highest level in over a year.
    • The Fed currently maintains interest rates at 3.5% to 3.75%.

    Still unconfirmed:

    • The Fed is losing patience with supply shocks after previously overlooking tariffs.
    • CME FedWatch Tool data suggests a 90% probability of another rate hike and only a 0.7% chance of a rate cut by June 2026.
    • Wall Street hedging is at its lowest level since April 2025.
    confidence 90%

  2. Warsh delivers hawkish shock in first FOMC meeting

    Fed Chair Kevin Warsh led his first FOMC meeting on June 17. He rejected market demands for rate cuts. A new dot plot indicates possible rate hikes in 2026 due to stubborn inflation.

    What's confirmed:

    • Kevin Warsh chaired his first Federal Open Market Committee meeting on June 17.
    • The Fed dot plot signals possible 2026 hikes amid stubborn inflation.

    Still unconfirmed:

    • US stocks traded mixed on Monday as investors assessed progress in US-Iran peace talks.
    • SpaceX shares fell for the third day in a row.
    confidence 100%

  3. Markets Adjust to Hawkish Stance of Fed Chair Kevin Warsh

    Federal Reserve Chair Kevin Warsh is signaling a commitment to fight inflation. This approach rejects the easy money expectations of some investors. Futures markets now anticipate at least one rate increase this year.

    What's confirmed:

    • Kevin Warsh is the new leader of the Federal Reserve.
    • Warsh has vowed to fight inflation.

    Still unconfirmed:

    • Futures markets now see at least one interest rate increase this year.
    confidence 80%

  4. New Fed Chair Kevin Warsh Signals Hawkish Shift Despite Steady Rates

    Federal Reserve Chair Kevin Warsh held interest rates steady at 3.5-3.75% during his first meeting. However, his tough stance on resurgent inflation and hints of future hikes triggered a sharp market sell-off. Nine of 18 officials have signaled potential rate hikes in 2026.

    What's confirmed:

    • The Federal Reserve held interest rates steady at 3.5-3.75%
    • New Fed Chair Kevin Warsh delivered a hawkish message regarding inflation during his first meeting.
    • Nine out of 18 Fed officials signaled potential rate hikes for 2026.
    • The Fed's recent communication triggered a market sell-off.

    Still unconfirmed:

    • Kevin Warsh wants markets to guide the Fed rather than the Fed guiding the markets.
    • Warsh passed a first independence test by deciding not to be a toady for Donald Trump.
    confidence 90%