Kevin Warsh’s first meeting in charge of the Federal Reserve ended with US interest rates locked between 3.5% and 3.75% — but the central bank’s own forecasts revealed a deepening split over whether to push them higher.
Fed governors were divided on whether to keep rates steady or raise them to tame inflation, which has been pushed up by the US-Israel war in Iran. With inflation running at an above-target 3.8% and uncertainty surrounding Donald Trump’s deal to end the conflict, the rate-setting Federal Open Market Committee (FOMC) unanimously decided to hold.
“Fed holds rates at Warsh's first meeting as dot-plot shows majority see a hike this year.”
President Trump, who had pressed Warsh’s predecessor Jerome Powell to cut interest rates, made clear he expected Warsh to deliver the same. But the FOMC’s statement on Wednesday marked a stark shift in the central bank’s communication style — one of Warsh’s key promises. The update ran to just 132 words, down from almost 350 in April, and concluded bluntly: “The Committee will deliver price stability.” It also removed language hinting that the Fed was leaning toward future cuts.
Alongside the decision, the closely watched “dot-plot” grid of central bankers’ expectations showed nine of the 18 FOMC participants predicted an interest rate hike this year, while only one expected a cut. The remaining eight forecast no change. Warsh, who opposes the dot-plot, did not offer his own projection but said he encouraged his colleagues to proceed with it.
Samuel Tombs, chief US economist at Pantheon Macroeconomics, said the “big news” from Wednesday was the dot-plot pointing to potential rate increases before the end of the year.
Reacting to the decision, Trump said: “It’s alright… whatever.” When asked about the possibility of rate hikes, he replied: “It could happen… it’s hard to believe,” adding “it just keeps the country down, it is so unusual.” But he heaped praise on Warsh, whom he nominated to replace Powell. “We have a very good guy over there now, so I’m guided by what he wanted,” Trump said.
With the Fed now signalling higher rates ahead and inflation still above target, Warsh’s tenure begins under pressure from both the data and the White House — a balancing act that will test his promise of fewer words and clearer action.