Warsh Takes the Reins at the Fed: Hawkish Tone Signals Further Rate Hikes
The new Chair of the Fed, Kevin Warsh, has made his mark on the institution with a decidedly hawkish approach.
His proposal for a 25-basis point hike was approved unanimously last week, and the subsequent press conference left no doubt about his priority: bringing down inflation.
The economic projections were upbeat, with the median dots in the dot plot of interest rate projections nudged higher than anticipated. This suggests that the Fed is considering one more rate increase in 2026, with no change in 2027 - a whole 50 basis points higher than initially outlined at the June meeting.
Futures markets are now pricing in an additional hike as a certainty by December, with a 50/50 likelihood of a back-to-back hike in November. The Fed's call remains highly data-dependent and assumes that no further nasty surprises await in the next few inflation releases out of the US.