Fed's Warsh signals revamp, but offers little substance on rates

Kevin Warsh began his tenure as chairman of the Federal Reserve with a solemn vow to curb inflation and a clear sign that he plans to swiftly revamp how the U.S. central bank does its job.

Missing was any clear guidance from him on what it means for interest rates.

Following the Fed's two-day policy meeting, Warsh on Wednesday passed a critical litmus test with investors skeptical of his inflation-fighting commitment. Markets took to heart new projections from Fed officials showing many of Warsh's colleagues now expect they'll need to raise rates at least once this year, sending Treasury yields higher.

Still, the new Fed chief avoided giving any signal on his own preferred rate path. In his first meeting at the helm, he instead downsized the Fed's post-meeting policy statement and announced the creation of several "task forces" on monetary policy. Those steps marked his first efforts toward the "regime change" he has long sought at the central bank and eliminating the policy guidance he said hamstrung the Fed in recent years.

"There are a lot of questions that remain to be answered," said Seth Carpenter, global chief economist at Morgan Stanley and a former Fed staffer. "He made it clear that he is committed to bringing inflation down. But exactly how that was going to happen, I don't think it was clear."

Fed officials left interest rates unchanged in a range of 3.5% to 3.75%, a widely expected outcome. But the 19 policymakers also continued their march toward potential rate hikes, with nine of them now expecting at least one this year. In a statement that was less than half as long as the one that followed the last meeting, Warsh and his colleagues also pledged to "deliver price stability."

While Warsh's many longstanding qualms with Fed practices had some predicting he would change how the gathering was conducted or even eliminate the post-meeting press conference, the new Fed chief stuck with a few traditions this time around.

That included acknowledging inflation's persistence, and that the Fed would deliver on its mandate to bring it down.

"We've missed for five years, and we're going to fix that," Warsh said of the Fed's 2% inflation target. He added that he saw no reason for the Fed to consider revising that goal, having not yet achieved it.

Traders are now pricing in two hikes by the end of the first quarter of 2027, compared with one prior to Wednesday's Fed decision, according to federal funds futures.

But for all the signals the market took from Fed officials' increasing preoccupation with inflation and the possibility that higher interest rates may be needed to combat it, Warsh emphasized his colleagues wouldn't be bound by their forecasts, pointing to the high degree of uncertainty hanging over the economy.

President Donald Trump, who made a commitment to lower rates his own litmus test in his choice for a new Fed chair, said "it's alright, whatever," when asked Wednesday about the Fed's decision to hold rates steady, calling Warsh "a very good guy."

In that sense, Warsh managed to pull off something that many Fed watchers thought might be tricky: keeping both the White House and Wall Street onside.

"If you were expecting him to be hawkish, you loved it - but was that his intention? We don't know," said Julia Coronado, founder of the research firm MacroPolicy Perspectives LLC. "He didn't come out and say, ‘I think we need to consider a hike because inflation is a problem.' He said that ‘price stability is our mandate and we're going to have to deliver.'"

Changes ahead

Warsh began to implement his grand vision for change at the Fed by eliminating forward guidance - signals about the path for interest rates that many think is best left for when rates are near zero - from the statement and his press conference. In a similar vein, he also refused to submit his own projection for rates in the Fed's so-called "dot plot."

Perhaps most notably, he also announced five task forces that will look into everything from the data the Fed uses to forecast the economy to how it implements policy.

Warsh said he is actively recruiting both internal and outside experts for those efforts and said the groups will likely deliver their findings by the end of the year. That time frame eliminates the concern - borne from the brute-force changes of last year's Department of Government Efficiency campaigns - from some Fed watchers that Warsh would come in bulldozer-style and enact sweeping change all at once at an institution accustomed to a much slower pace.

The new Fed chairman, a lawyer by training who exhibited his typically cool and collected manner at his debut press conference, won points for delivering on several much-watched fronts: He spoke to the Federal Open Market Committee's views and signaled that change is afoot, but in a measured, digestible way.

"It was a low bar for Kevin Warsh and he cleared it," said Heather Long, chief economist at Navy Federal Credit Union.

(With assistance from Ye Xie, Maya Prakash, Maria Eloisa Capurro, Jonnelle Marte and Enda Curran.)

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This story was originally published June 17, 2026 at 8:51 PM.