Kevin Warsh was sworn in as Federal Reserve Chair on May 22, 2026. Within hours, the bond market had already placed its bet on what comes next: higher rates, not lower ones.
Interest-rate swaps now indicate more than 50% odds of a 25 basis point rate hike by December 2026. The probability of at least one hike before year-end sits above 70%.
How we got here
Inflation has remained persistently above the Fed’s 2% target, and recent readings have been sticky enough to force a rethink across trading desks.
Fed Governor Christopher Waller added fuel to the fire by publicly noting that the central bank’s next move could equally favor a rate hike or a hold. That kind of language, deliberately leaving the door open to tightening, is a significant departure from the dovish tone markets had grown comfortable with.
