Warsh's Hawkish Stance Sends Markets Pricing in Three More Rate Hikes Through June

Kevin Warsh, the Fed chair who took office just over four months ago, has sent markets pricing in three additional rate hikes through June 2027. This shift in expectations comes after Warsh's speech at Jackson Hole on August 28, where he expressed concern over PCE inflation at 3.7%, recommitting to the Fed's 2% target.

Since then, hike odds have jumped from around 56% to over 60%, according to CNBC, and the market reaction to the September rate hike was not just about the 25 basis point increase itself but what it signaled for future moves. Warsh's phrase 'a dose of accommodation removed' sent Wall Street analysts scrambling to understand how hawkish he intends to be.

Traders have responded by pricing in three additional hikes through June, with the dollar reaching a three-month high and every asset that depends on cheap money bracing for a Fed chair who has meant exactly what he said. The 10-year Treasury yield climbed back above 5% and sat at 5.12%, while Warsh attributed higher long-end yields to economic strength, competition for capital, and geopolitical factors rather than fears about the Fed itself.