Warsh's 2% Inflation Target: Market Reacts as Fed Tightens Stance

Since Kevin Warsh succeeded Jerome Powell as Fed Chairman in mid-May, the S&P 500 has gained a modest 4.2%, with its most pronounced move coming over just the last week or so.

The market has been relatively muted since Warsh took over as Fed Chairman -- rightly so, given his deliberate approach of sticking to a strict script about goals on inflation.

Warsh's latest remarks imply that reduced interest rates are far from guaranteed. In fact, he stated, 'There is no soft inflation target, there is no soft implicit target -- not on this Committee's watch. There is only a target, and it is 2%.'

This phrase, delivered during his July 29 press conference following the second major policy meeting under Warsh's chairmanship, signals that the Fed intends to treat the 2% inflation goal as non-negotiable.