Warsh Signals Rate Hike as US Fed Shifts Stance

The new head of the US Federal Reserve (Fed), Kevin Warsh, has undergone an apparent U-turn on interest rates. Last year, he was a vocal advocate for cutting rates, but at his first meeting as chair in mid-June, he signaled a likely increase instead.

Warsh's new stance is nuanced and has been misinterpreted by investors. He has set up a review of the Fed's processes and criticized its data as 'old-fashioned', suggesting that he may be more inclined to reduce rates than initially thought.

However, Warsh also expressed his opposition to forward guidance, which was a hallmark of his predecessor's policy. This could mean that the Fed will adopt a less-active approach, allowing interest rates to move freely without intervention.