Warsh Says FOMC Had 'Good Family Fight' on Fed Policy as Rates Stay Steady

Warsh delivered a surprisingly hawkish dot plot with 8-9 members projecting a hike as next move, but the FOMC statement was dovish focusing on supply-side inflation. Markets saw front-end yields spike 16bps while breakevens fell, indicating the hawkishness is viewed as credible inflation-fighting. Key tailwind: oil down $35 from recent highs reduces pressure to actually hike. Fed likely to become less communicative, increasing market reliance on data and speeches.

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implicit

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Metals

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breakevens cautious down

Morgan Stanley 8.4
Investment Bank $1600.00B
Andrew Szczurowski 8.5

Warsh Says FOMC Had 'Good Family Fight' on Fed Policy as Rates Stay Steady

US 10y; Fed funds

dxy

If every other central bank responds to supply shocks too, might have weaker dollar. But hawkish Fed relative to others could support dollar near-term.

ndx

Risk assets falling on hawkish news, but question remains whether Fed will follow through. If oil stays lower reducing inflation pressure, risk assets could recover.

rut

Small caps more sensitive to rate expectations and housing market weakness. Hawkish dot plot and higher front-end rates negative for RUT in near term.

wti

oil's just fallen $35... if the war in Iran is over and oil is going to resume its kind of... baggage

6 calls

-20

consistently off direction or weak follow-through

5/27/2026 1:06:05 AM	medium term up	20 days later	-13.62%	-13.62%
5/12/2026 6:55:36 PM	short term up	5 days later	+7.56%	+7.56%
5/7/2026 7:48:56 PM	medium term cautious up	20 days later	-6.83%	-3.42%
3/28/2026 12:19:11 AM	medium term up	21 days later	-12.90%	-12.90%
3/12/2026 10:06:31 AM	short term up	5 days later	-2.42%	-2.42%
1/5/2026 1:42:32 PM	short term cautious down	6 days later	+4.15%	-2.07%

Show all 6 wti results

yields

16 basis points higher on the two year... one of the biggest flattening days we've seen in some time

23 calls

-2

no reliable edge (random outcomes)

5/20/2026 9:05:17 AM	short term up	5 days later	-2.03%	-2.03%
5/13/2026 1:42:53 AM	short term cautious up	5 days later	+4.62%	+2.31%
5/7/2026 7:48:56 PM	medium term cautious down	20 days later	+2.09%	-1.04%
3/28/2026 12:19:11 AM	medium term up	21 days later	-2.12%	-2.12%
12/23/2025 1:36:10 AM	short term cautious down	5 days later	-0.48%	+0.24%
12/18/2025 1:46:01 AM	medium term cautious down	20 days later	+0.77%	-0.39%
12/8/2025 1:14:06 PM	medium term cautious down	20 days later	-1.67%	+0.84%
12/2/2025 9:28:55 PM	medium term cautious down	20 days later	+2.76%	-1.38%
11/28/2025 6:46:36 PM	medium term down	21 days later	+1.78%	-1.78%
11/25/2025 12:34:15 AM	medium term down	20 days later	+3.78%	-3.78%
11/22/2025 1:57:04 AM	medium term cautious down	21 days later	+3.57%	-1.78%
11/14/2025 8:08:25 PM	short term cautious down	7 days later	-2.30%	+1.15%
11/12/2025 1:48:25 PM	short term cautious down	5 days later	+0.27%	-0.13%
11/4/2025 2:20:08 PM	medium term cautious down	20 days later	-3.73%	+1.86%
11/3/2025 5:11:21 PM	medium term cautious down	20 days later	-1.25%	+0.62%
10/21/2025 3:40:54 PM	short term cautious down	5 days later	+1.11%	-0.56%
9/24/2025 2:05:49 AM	short term cautious down	5 days later	-0.58%	+0.29%
9/17/2025 8:50:18 PM	medium term cautious down	20 days later	+0.61%	-0.30%
9/8/2025 7:17:58 PM	short term cautious down	6 days later	-0.98%	+0.49%
9/4/2025 5:07:54 PM	medium term cautious down	20 days later	+2.10%	-1.05%
8/12/2025 6:27:35 PM	short term cautious down	5 days later	+2.43%	-1.22%
8/5/2025 10:59:28 PM	medium term down	20 days later	+0.90%	-0.90%
8/5/2025 2:12:54 PM	short term cautious down	5 days later	+1.26%	-0.63%

Show all 23 yields results

Initial impressions on FOMC decision and whether markets were surprised.

Speaker1
Speaker2

FOMC statement was surprisingly dovish, focusing on supply-side inflation factors and unchanged labor market, with only one hawkish line on 2% target commitment.

The dots did all the talking today, speaking far more than the statement could.
Speaker3

The dot plot and press conference were very hawkish, but question remains whether this is bark without bite - Warsh needed credibility in first press conference and may not follow through.

Risk assets falling on news but need to see if they actually follow through. 16bps move in 2-year was surprising - 8-9 FOMC members projecting hike as next move vs expected 3-4.
Geopolitical risk: oil markets reacted to president's Iran comments about potential bombing if terms not agreed.

Speaker1
Speaker2

Warsh put no emphasis on labor market or dual mandate, focused entirely on price stability - vintage Kevin Warsh performance.

Any discussion of cuts was not encouraged by Warsh. His real opportunity was using the bully pulpit.
Speaker2

Long-term rates floated up but break-evens fell across the curve - markets view this as hawkish but not necessarily on inflation expectations.

Real rates still rising throughout curve, questioning if this indicates regime change.
Speaker3

If Fed becomes less communicative, volatility will increase. Warsh's sole focus on inflation should compress break-evens and give bond investors confidence.

30-year yields actually down despite front-end move - one of biggest flattening days. Break-evens down 50-60bps at front end in last month, all related to oil.
Risk that Fed silence during market volatility could be filled by others, losing control of narrative.

Speaker1
Speaker2

Communications as policy tool is asymmetric - valuable at zero lower bound but unnecessary hand-binding when risk is two-sided with divided committee.

Warsh likely sees removing oneself from crafting narrative as positive - let markets digest information as available.
How to determine Fed policy path without guidance - asking Andrew about information void.

Speaker5
Speaker3

Will read more intra-meeting speeches from different FOMC members. Information void will push markets to look elsewhere.

Tough to walk back press conferences if on pause for 6-12 months. Task force may ultimately decide to keep them.
Recap: Warsh announced four task forces - communications, balance sheet, data sources, and productivity/jobs.

Speaker1
Speaker2

In absence of formal FOMC communications, information may come from data and evolving global conditions rather than people.

Need to work the other way as economists - consider intersection of markets and real economy. Higher rates already tightening financial conditions, doing heavy lifting for Fed.
Concern about task force on 'use and reliance on existing data sources' potentially lending itself to manipulation.

Speaker1
Speaker3

Warsh has spoken about quirks in inflation data - OER showing 3.5% while Zillow Rent Index shows 1-handle and Apartment List shows negative. Changes to data sources welcome but archaic.

Inflation problem solely reliant on moving oil - if oil comes down it solves itself. This is supply shock not demand driven, Fed historically doesn't respond to those.
Question on transmission mechanism of monetary policy and whether we're in restrictive world.

Speaker5
Speaker3

Housing market clearly impacted - homebuilding and sales depressed. People with 2.5-3.5% mortgages won't move into 50% more expensive house with double rate.

Data center construction filling void in construction that would typically exist until rates came down.
Warsh called AI the most important change in economy and business in our adult lives - asking for agreement and Fed's role.

Speaker1
Speaker2

Productivity gains from AI probably overstated. Warsh danced around question about inflation pressures from AI buildout vs disinflationary efficiency gains.

Answering directly would require getting even more hawkish while tying American prosperity to AI implementation. Won't get anything on Fed policy front tied to AI.

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