Warsh Fails to Convince Market of Inflation Fight
The new Federal Reserve Chairman Kevin Warsh is struggling to convince the market that he's committed to fighting inflation. Despite his efforts, investors remain skeptical about the Fed's intentions.
Warsh's July 29 press conference was met with a 'central bank inflation credibility shock' according to Bank of America's U.S. economy team. The S&P 500 rose 5.5% from that date through September 8, but the market is pricing in the Fed's credibility question rather than the interest rates themselves.
The next rate decision will be announced on September 16, and there are three reasons investors should care about what happens next. Firstly, gold, a traditional inflation hedge, is currently undervalued at 18% below its January 29 all-time high. If Warsh fails to regain market trust, the price of gold could rise further.
Secondly, interest rates on consumer and business debt are already trending higher than the federal funds rate. The average 30-year fixed mortgage rate reached 6.7% in September 2026, up from 6.5% a year earlier, according to Freddie Mac.