Are rate hikes ahead? Warsh underlines inflation concern
On inflation, his tone was unambiguous. “While this summer’s readings were better than expected, they do not tell me that underlying trends have meaningfully improved,” Warsh said. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.”
Markets responded swiftly. The policy-sensitive 2-year Treasury note soared nearly 8 basis points to 4.31%, its highest level since late July, while stock market indexes climbed after the 10 a.m. ET speech.
Traders repriced the probability of a rate hike at the September Federal Open Market Committee (FOMC) meeting to 55.7%, roughly 20 percentage points higher than the prior day, according to the CME Group’s FedWatch tool.
A Fed rate hike could mean lower mortgage rates. Veteran bond trader Billy Abrams says chart patterns point to a Treasury rally before yields climb again. Read more now.https://t.co/YT9a5YA014#mortgage #FederalReserve #bondmarket #IFSecurities
— Mortgage Professional America Magazine (@MPAMagazineUS) August 21, 2026
A quieter Fed, louder market reaction
Warsh has been critical of what he sees as the Fed’s outsized role in directing market behavior.
“We should not indulge a regime in which market participants are looking primarily to the Fed for their next trade,” he said. He called for a “quieter Fed, more purposeful in its communications” and declared that forward guidance has “overstayed its welcome.”
