Overview
- At the Fed’s June 17 meeting Warsh kept the federal funds rate at 3.50%–3.75% and the FOMC closed its statement with the line, “The Committee will deliver price stability,” while removing forward guidance from its language.
- Warsh launched five internal task forces to redesign Fed communications, data use, inflation frameworks, and balance‑sheet operations, including plans to reduce mortgage‑backed securities and increase Treasury holdings.
- Markets quickly reacted by lifting Treasury yields, pushing the S&P 500 lower, and prompting bond managers to shift into intermediate‑term Treasuries; nine of 18 FOMC officials’ dot‑plot votes signaled at least one rate hike this year.
- Two immediate external tests will shape perceptions of his agenda: Warsh’s public appearance at the ECB forum in Sintra and the U.S. Supreme Court’s expected ruling on President Trump’s attempt to remove Governor Lisa Cook, a case with implications for Fed independence.
- The changes come with a backdrop of inflation running above 4% and a large central‑bank balance sheet, which together mean higher borrowing costs and mortgage pressure for households if the Fed tightens further while investors watch for slower MBS buying and shifts in long‑term yields.