Federal Reserve Chairman Kevin Warsh has moved quickly to reshape monetary policy since taking the helm on May 22, following his appointment by President Trump.
Warsh has repeatedly talked up his commitment to fighting inflation, but Wall Street is growing impatient for concrete action to back up his hawkish rhetoric.
His comments at a recent post-meeting press conference triggered a sharp selloff in Treasuries, sending yields surging to levels not seen in nearly two decades.
Thirty-year Treasury yields remain above 5.1%, having briefly tipped over 5.2%, a benchmark last reached in late 2007, following the conclusion of the most recent FOMC meeting.
Ten-year Treasuries have nudged above 4.65%, while rate-sensitive two-year Treasuries have slumped under pressure from the shifting policy outlook.
Warsh has pledged what he calls “regime change” at the Fed, including rolling back so-called forward guidance on where interest rates are headed, a significant departure from recent central bank practice.
Three weeks before the September 16 FOMC meeting, market-implied odds of a rate hike have jumped to roughly 55%, up from about 40% just one week earlier, following Warsh’s Jackson Hole debut as Fed chair.
That shift is notable given the Fed’s last move was a cut on December 10, 2025, leaving the target rate pinned at 3.75% ever since.
“Traders want to see commitment from the Fed after a couple of FOMC meetings where they weren’t too sure how to read the new chair,” said Eric Wallerstein, chief macro strategist at Clocktower Group.
Wallerstein added that “it’s important that the Fed does their job — but at the end of the day, long-term borrowing costs are not set by the Fed.”
Warsh further rattled markets by saying he would be “hard-pressed” to describe broad financial conditions as restrictive, a signal that he believes current rates are not tight enough to slow economic growth.
Federal-funds futures traders responded swiftly, ratcheting up bets on a rate hike as soon as the next Fed meeting, with the probability jumping to nearly 60%, up from just above 30% earlier in the week.
The bond market’s hawkish turn reflects deep uncertainty about the policy direction under a Fed chair who has yet to fully establish his credibility with investors navigating a volatile rate environment.
