world-economy

Warsh Signals Hawkish Fed Stance, Rate Hikes Expected Within Months

Federal Reserve Chairman Kevin Warsh's focus on inflation control sent shockwaves through financial markets. Traders are now pricing in interest rate increases as soon as the July meeting. Despite expectations that Warsh would prioritize looser monetary policy, his inaugural news conference emphasized the central bank's commitment to price stability. The 2-year Treasury yield surged as Warsh spoke, while futures markets rapidly repriced rate expectations. Probability of a July rate hike climbed to roughly 33 percent, while September odds spiked to 67 percent by midday Thursday. Looking further ahead, markets assigned 45 percent odds to a second hike by September 2027. The implied fed funds rate for May 2031 reached 4.78 percent, suggesting five potential increases over five years. Warsh's inflation-fighting credentials represented a departure from earlier market narratives.