THE WARSH FED:
NO GUIDANCE, LIVE HIKE RISK
Kevin Warsh chaired his first FOMC meeting June 16-17 and rewired how the Fed communicates in a single session. For index futures traders, the operating manual changed: there is no forward guidance anymore, inflation is running 4.2%, and half the committee has a HIKE penciled in. This page is the desk's running tracker of the new regime.
Fed Funds Target
3.50–3.75%
June Decision
HOLD (UNAN.)
May CPI (y/y)
4.2%
Next FOMC
JUL 28-29
What Changed Under Warsh
- Forward guidance is gone. Warsh explicitly said the committee decided not to hint where rates are headed. He also declined to publish his own rate projections. Markets now fly without the map they've had for most of two decades.
- The statement was gutted and rewritten. CNBC's redline of the June statement showed drastic structural changes — shorter, less prescriptive language.
- The bias flipped from cuts to hikes. The June dot plot: 9 of 18 officials project at least one hike before end-2026; 6 of those project TWO 25bp hikes. That is the first hiking-bias committee since the inflation fight of 2022-23.
Why the bias flipped: the Iran conflict that started in March spiked energy prices and dragged headline CPI to 4.2% y/y in May. This is a supply-shock inflation problem landing on a brand-new chair who built his reputation as a hawk.
The Tape Since June
| Date | Event | Market read |
|---|---|---|
| Jun 16-17 | First Warsh FOMC: hold at 3.50-3.75%, unanimous; guidance abolished; dots show hike bias | Hawkish shock — financials bid, tech pressured into the meeting |
| Jul 1 | Warsh at ECB forum: declines to hint at July, says inflation "too high"; notes Fed increasingly open-minded that AI is deflationary | Hawkish base, dovish AI wrinkle |
| Jul 2 | June payrolls: 57k vs 113k expected | Weak print eased hike fears — YM record close same day |
July 28-29 Setup
- No Summary of Economic Projections at this meeting — no new dots. The statement and the presser carry everything, which raises the vol-per-word ratio.
- The June CPI print (mid-July) is the real decision-maker. Another 4%+ headline keeps a hike live; energy cooling gives the hold cover.
- Labor is cracking: 57k payrolls says the economy may be doing the Fed's tightening for it. The committee has to weigh supply-shock inflation against a softening job market — the classic stagflation bind.
- It lands mid-earnings-season, the week mega-cap tech reports. Stacked catalysts.
Scenarios Into and Out of the July Meeting
| Scenario | Rates read | Index futures read |
|---|---|---|
| Hold + hawkish presser (base case) | Hike stays priced for fall | Chop; rotation regime persists — YM relative strength, NQ multiple-capped |
| Surprise 25bp hike | Front-end reprices violently | Both legs sell; NQ worst; correlation snaps back to 1 the ugly way |
| Hold + soft-labor emphasis | Hike odds fade | Relief squeeze, NQ leads (crowded short + intact trend channel) |
| Hot June CPI before meeting | Hike odds spike pre-FOMC | The single biggest risk to every long — de-risk into the print |
How to Trade the New Regime (Research, Not Advice)
- Event vol is structurally higher. No guidance means every FOMC, CPI, and payrolls print carries more surprise capacity. Size accordingly around the calendar.
- Weak data is currently good for the tape (removes hike risk) — until it's bad (recession read). The 57k payrolls got the good-news treatment; two more like it and the read flips.
- Watch ZQ (fed funds futures) for the real-time hike odds and ZN for the long-end read. When ZQ starts pricing the hike, index futures will already be moving.
- The AI-deflation comment is a sleeper. If the Fed formally adopts "AI is deflationary" into its framework, that is a structural bull argument for tech multiples — file it, watch for repetition.
Key Takeaways
- Rates 3.50-3.75%, held unanimously; half the committee leans HIKE by year-end. First hiking bias since 2022-23.
- Forward guidance is dead — expect bigger reactions to every data print and FOMC statement.
- Jul 28-29 has no dots; June CPI (mid-July) is the real event before it.
- Stagflation bind: 4.2% CPI vs 57k payrolls. Whichever side breaks first sets H2's direction for NQ/ES/YM.
Sources
- CNN — Warsh promises new vision; colleagues eye a hike
- NPR — Fed holds steady, hints at hike later this year
- CNBC — Warsh drastically alters Fed statement (redline)
- CNBC — Warsh at ECB forum: inflation "too high" (Jul 1)
- Chase — 3 takeaways from the June 2026 FOMC
- Fox Business — June FOMC: Warsh era begins
- Federal Reserve — Official FOMC meeting calendar
- TheStreet — June payrolls 57k vs 113k expected (Jul 2)