Warsh's Credibility in Question as Bank of America Flags Uncertainty

Bank of America has questioned the leadership of President Donald Trump's new Federal Reserve chairman, Kevin Warsh. Warsh announced last week that the Fed would not raise or lower interest rates, and now one of the big banks is questioning his leadership.

According to Bloomberg's Joe Weisenthal, Bank of America thinks that Warsh seems too relaxed about inflation, making investors nervous. Markets now expect more inflation risk and uncertainty.

The bank noted that Fed Chair Warsh's press conference on the back of a 9-3 decision to hold the policy rate unchanged came across as dovish, adding uncertainty. This led to a bear steepening, high inflation breakevens, and higher risk premia in the market.

Employ America executive director Skanda Amarnath said that Warsh was hyping rate hikes for July but then backed out, and now the committee will compensate with more hikes in 2026. Three hikes are the right base case for the rest of the year, he believes.