Kevin Warsh just finished his debut as Federal Reserve Chair, and Wall Street is already reaching for the antacids. The FOMC voted unanimously to hold interest rates steady at its June 16-17 meeting, but the tone coming out of Warsh’s first press conference was anything but reassuring for investors hoping the era of tightening was behind them.
Equities sold off broadly on the day, with the S&P 500, Nasdaq, and Russell 2000 all declining. The 2-year Treasury yield, a reliable barometer of near-term rate expectations, jumped roughly 13 basis points to 4.18%. In English: bond traders are pricing in a real chance that rates go higher before they go lower.
A new sheriff, a new style
Warsh, who was sworn in on May 22 after being nominated by President Trump in late January, wasted no time distinguishing himself from his predecessors. His first major move was rhetorical: he plans to scale back the Fed’s use of forward guidance and public communication, favoring what he called a more restrained approach.
“Persistently high prices are a burden for the American people, but the recent past need not be prologue.”
