Jerome Powell stepped down as Fed chair following the April meeting. The first FOMC meeting chaired by Kevin Warsh concludes today. The Fed will announce its latest interest rate decision at 2:00 p.m. ET, followed by Warsh’s press conference half an hour later.
Data from the CME FedWatch Tool, which tracks market expectations, shows a 99.5% probability that rates will remain unchanged. No surprise is expected. The main issue is not the rate decision itself: the tightening cycle is officially over, the easing cycle has yet to begin, and uncertainty remains over where the Fed will head during this in-between period under Warsh.
US inflation is at its highest level in three years. It also remains unclear when the economic effects of the tensions with Iran will fade. For this reason, attention is focused less on the interest rate decision and more on what Warsh will say during the press conference.
Warsh is no stranger to the Fed. He was appointed by George W. Bush in 2006, becoming the youngest Fed governor at the time at just 35 years old. He remained in the role until 2011, serving through the height of the 2008 global financial crisis.
During the crisis, Warsh acted as the Fed’s liaison with Wall Street and played a role in the negotiations that helped Morgan Stanley survive. He left the Fed in 2011 after criticizing its balance sheet expansion policies. In the years that followed, he became one of the central bank’s most outspoken external critics at Stanford University’s Hoover Institution.
His appointment, made by the Trump administration, was confirmed by the Senate in an unusually partisan 54-45 vote and became official in May.
The question now is whether Warsh will adopt a dovish tone and lay the groundwork for rate cuts by highlighting falling oil prices and AI-driven disinflation, or stick to the scenario already priced in by markets. He has previously criticized the Fed for “communicating too much” with markets, and he is also likely to face questions on that issue during the press conference.
The dot plot will be the main area to watch. In the most recent projections released in March, seven officials expected no rate cuts in 2026. Among the others, seven projected a 25-basis-point cut, two expected 50 basis points, two forecast 75 basis points, and one anticipated 100 basis points of easing.
Interest rate futures are currently pricing in an 80% probability of a 25-basis-point hike by December. A decline in this projection in the updated dot plot would be considered positive for cryptocurrencies and other risk assets.
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For now, there is little sign of nervousness in the market. Volatility linked to Bitcoin and Ethereum has completely reversed its early-month increase and fallen to its lowest level in two weeks.
The US 10-year Treasury yield has also eased to 4.43% after climbing above 4.55% following the outbreak of the war in late February. This yield is widely regarded as a key benchmark for overall borrowing costs across the economy. When it declines, financial conditions ease and risk assets gain some breathing room.
