The market didn't like what it heard from the Fed and its new leader Kevin Warsh
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- Federal Reserve held rates steady at the end of Kevin Warsh's first monetary policy meeting as chair, but the dot plot spooked markets: nine of the FOMC members who submitted projections expect the fed funds rate to end 2026 above the current 3.5%–3.75% range.
- The S&P 500 closed down 1.2% as bond yields rose, with the 10-year Treasury yield climbing back to nearly 4.5%; 18 of 19 possible dots were submitted, with one member declining.
- Warsh confirmed he was the member who "refrained from offering any projections," consistent with his past criticism of Fed forward guidance.
- Warsh shut down a question about why the Fed didn't raise rates despite an upwardly revised near-term inflation outlook, redirecting the journalist back to the Fed's statement and prompting speculation about a reluctance to improvise off prepared text.
- Warsh unveiled five new independent task forces reviewing Fed communications, balance sheet policy, data sources, productivity and jobs, and the inflation framework — with most reviews targeted for completion by year's end.
- The FOMC's hawkish tilt sets up a clash with President Donald Trump, who has made clear he expects lower rates from his appointee.
- Warsh argued that market prices are useful to the Fed only when investors independently analyze economic data rather than trying to game the central bank's interpretation.
Why it matters: Nine FOMC members now project rates ending 2026 above the current 3.5%–3.75% range — the opposite of what markets expected from a Trump-appointed chair. The S&P 500's 1.2% drop and the 10-year yield's jump to nearly 4.5% priced in that hawkish surprise on Warsh's debut, while his task forces quietly tee up a structural rewrite of Fed communication by year-end.
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