Fed's Warsh shocks the market: votes for rate hike in 2026
Kevin Warsh's first meeting as Chairman of the Federal Reserve System was an event that shifted market expectations. Although the key interest rate remained unchanged in the range of 3.50%–3.75% (already the fourth consecutive meeting), the real surprise lay in the tone and forecasts. Nine out of eighteen members of the Federal Open Market Committee (FOMC) voted for a rate hike in 2026. This is a radical reversal compared to previous meetings, where the majority leaned toward easing or maintaining the current level.
Tone Shifts: From 'Dovish' to 'Hawkish'
In the accompanying statement, the Fed removed the phrase about 'additional adjustments' to policy. Instead, the regulator emphasizes a neutral, entirely data-dependent approach. Inflation, stubbornly hovering around 4.2% year-over-year, and a resilient labor market are forcing officials to act more cautiously. Citadel Securities has already warned that markets are underestimating the risk of a rate hike as early as September, amid strong demand, supply chain issues, and a boom in AI investments.
New Chairman Warsh made it clear at his first press conference that he prefers a 'more restrained' Fed and a reduction in the volume of advance signals for the market. This dashes hopes for a dovish approach that many had associated with his arrival. Fidelity analysts had forecast increased volatility in the debt market due to uncertainty in communications, and markets reacted immediately.
Market Reaction: Sell-off in Stocks and Bonds
Markets reacted negatively to the 'hawkish' signal. The S&P 500 index fell by 0.6%, the Nasdaq Composite lost 0.7%, and the Dow Jones Industrial Average dropped 160 points (0.3%) by mid-session. The yield on two-year Treasury notes surged by 11 basis points to 4.153%, while the ten-year yield rose by 4 basis points to 4.469%. The U.S. dollar strengthened.
My Analysis: The market is clearly caught off guard. Investors who expected a dovish start from Warsh are now forced to reassess their models. If inflation continues to persist and the labor market remains overheated, a rate hike in 2026 will become not just a possibility, but an inevitability. For the cryptocurrency market, this means increased pressure: rising yields on risk-free assets and a strengthening dollar traditionally drain liquidity from risk assets, including Bitcoin and altcoins. Keep an eye on inflation data—it will be the key trigger in the coming months.