Fed Chair Warsh Strikes Hawkish Tone in First Congressional Testimony

Federal Reserve Chair Kevin Warsh reinforced a hawkish, data-dependent message in his first rounds of congressional testimony, appearing before the House Financial Services Committee around the release of the June inflation report and, days earlier, the Senate Banking Committee. Warsh emphasised the Fed's commitment to bringing inflation back to its 2% target and stopped short of signalling any near-term rate cut, keeping the benchmark federal funds rate in its current 3.50% to 3.75% range. His remarks followed a June policy meeting at which projections turned more hawkish, with nine of eighteen officials penciling in at least one rate increase before year-end and the median year-end rate projection rising to about 3.8%. Since taking the helm, Warsh has reshaped the central bank's communications, stripping out traditional forward guidance in favour of pure data dependence, and has launched several task forces to review how the Fed conducts and communicates policy. Markets have priced in a meaningfully higher chance of a rate hike at upcoming meetings, with the next decision due at the end of July, as sticky inflation and elevated oil prices keep policymakers cautious.