- Kevin Warsh’s first FOMC ended with a unanimous decision to keep interest rates unchanged.
- President Donald Trump backed the decision and said he trusts Warsh’s judgment.
- Warsh ended forward guidance, kept 2% inflation target, and warned against high inflation.
Federal Reserve Chairman Kevin Warsh kept interest rates unchanged at 3.5% to 3.75% in his first Federal Open Market Committee meeting since taking over from Jerome Powell. All 19 officials supported the decision, even as inflation remained well above the Fed’s 2% target.
The move came as consumer inflation climbed above 4%, while core inflation stood at 2.9% in May. Wholesale inflation moved above 6%, and oil prices remained roughly 30% higher than at the start of the year.
President Donald Trump, who had previously called for lower rates, accepted the decision. Speaking after the meeting, he said, “It’s alright, whatever.”
Asked about the possibility of future rate hikes, Trump replied that it was hard to believe but added that he trusted Warsh and would follow his judgment.
Warsh Signals a New Direction
Warsh used his first press conference to make clear that the Fed’s communication style is changing. He said the central bank will no longer provide markets with forward guidance on future interest rates.
The Fed’s policy statement was cut to about 130 words from more than 340 words during Powell’s final meeting. References that hinted at future rate cuts were removed. The statement ended with a simple message that the committee would deliver price stability.
Warsh repeatedly stressed that inflation remains too high and said the central bank must repair years of policy mistakes. He kept the 2% inflation target unchanged and refused to give any clues on what the next move could be. He also declined to say whether he had spoken with Trump since becoming Fed chairman.
Warsh announced five task forces that will review Fed communications, balance sheet policy, inflation frameworks, productivity and jobs, and the quality of economic data used in decision-making.
He also chose not to submit his own interest rate projections in the Fed’s dot plot, saying the exercise was not useful to him.
Rate Hike Expectations Rise
Although rates were left unchanged, projections released alongside the decision showed a more hawkish outlook. Nine of the 18 policymakers who submitted forecasts expect at least one rate increase this year. Only one official projected a cut, while eight expected no change.
Markets quickly adjusted to the possibility of tighter policy. Traders pushed the probability of a December rate increase to around 78%, up from 61% before the announcement. Some analysts said July remained unlikely, but September had become a realistic possibility if inflation data worsens.
Warsh also said higher borrowing costs have hurt the housing market but have not significantly slowed financial markets. He declined to comment on whether rising Treasury yields concerned him.
Markets Suffer Sharp Selloff
Markets reacted negatively after the Fed decision and Warsh’s comments. Around $1.5 trillion was erased across stocks, metals, and cryptocurrencies within ten minutes.
The S&P 500 lost 0.96%, wiping out about $610 billion in value. The Nasdaq dropped 1.28%, erasing roughly $490 billion. The Russell 2000 fell 1.47%, removing another $50 billion.
The broader crypto market also weakened. Bitcoin traded near $63,900, down 3% over 24 hours. Ether slipped 3.4% to $1,733, XRP fell 3.9% to $1.17, Solana lost 3.6% to $71, and Hyperliquid’s HYPE token dropped 7.2% to $69.
Related: Kevin Warsh Leads First Fed Meeting With Inflation Back Above 4%
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