Warsh's Hawkish Shift: Will Fed Deliver Surprise Rate Hike at July Meeting?

New Federal Reserve Chair Kevin Warsh is set to make his second major decision as head of the central bank, and investors are on edge about whether he'll deliver a surprise rate hike at the Fed's July meeting.

The market has given a slight probability to a rate hike, with the CME Group's FedWatch tool showing a 31.5% chance the Fed hikes rates by a quarter point within a range of 3.75% to 4%, compared to 68.5% that the Fed leaves rates unchanged.

Despite this, several FOMC members appear to favor such a move, including Lorie Logan and Beth Hammack, who have both indicated that inflation is too high.

Warsh has already begun to pull the Fed away from the stock market by making it clear he intends to provide much less forward guidance, which some see as a hawkish shift at the Fed. However, some experts believe Warsh may actually hold rates steady due to the recent data showing inflation slowed in June and midterm elections looming.