New Fed Chairman Kevin Warsh announced yesterday that the The Fed voted unanimously to keep interest rates in the range of 3.50% to 3.75%. But this stability may not last long. Although Warsh was nominated by President Trump with the expectation that he would lower interest rates quickly, the central bank signaled that they may, in fact, rise this year.
Much has changed since Warsh’s appointment: since he was chosen as the new president by President Trump in February, the war in Iran caused inflation to soar. This led Trump to tell Warsh in May to “do whatever he wants”… and that “do whatever he wants” was to keep interest rates unchanged for now.
Interest rate hikes now look more likely: yesterday, nine of 19 analysts predicted a hike later this year, after none of them did so in March. That raised the odds of two surges in 2026 from 17% on Tuesday to 37% yesterday, according to CME Group, and sent markets tumbling after Warsh’s press conference yesterday afternoon.
Warsh wants other changes. While interest rates won’t change immediately, the way the Fed collects and interprets economic data and the extent of its communication with the public will be closely scrutinized.
Warsh is forming five working groups to analyze the Fed’s operations. These committees will examine communications, economic data that is based on “old-fashioned research methods,” and the potential impact of artificial intelligence on growth without increasing inflation.
The new president broke with past practices and refrained from giving his opinion on a dot-plot interest rate forecast for the remainder of the year, leaving future guidance out of the report.
Asked about the central bank’s long-established 2% inflation target, Warsh said it did not need to be revised until it was achieved.
There was some good economic news: He concluded his first question-and-answer session with reporters by saying that Fed officials view labor markets as stable — unemployment held at 4.3% for three consecutive months through May — and some claim the trend is “better than that.”
