Fed Chair Warsh Hints at Additional Rate Hikes Within the Year
The U.S. central bank, the Federal Reserve, raised interest rates for the first time in three years, and Chair Kevin Warsh left the door open to further hikes within the year. At the Federal Open Market Committee (FOMC) monetary policy meeting held on the 16th local time, the central bank raised the benchmark rate by 0.25 percentage points to an annualized 3.75-4%. The vote was unanimous (12-0), marking the first rate hike since July 2023. The median year-end benchmark rate projection among FOMC members in the dot plot released that day came in at 4.1%.
At the press conference following the FOMC meeting, Chair Warsh said "inflation remains persistently elevated," noting that the Fed had partially withdrawn its accommodative stance. Citing the decision to shift from holding rates steady in July to raising them, he pointed to three reasons: confirmation of economic strength, an inflation trend falling short of targets, and judgments about the geopolitical situation. Chair Warsh repeatedly emphasized, "It is difficult to characterize the current level of interest rates as restrictive," adding, "That is why we partially withdrew our accommodative stance, and we will focus more on our responsibility for price stability." Markets interpreted this as a reference to the possibility of an additional rate hike within the year.
All three major New York stock indexes, which had held onto gains right up until the announcement of the rate hike, turned negative following Chair Warsh's remarks. The yield on the 10-year U.S. Treasury note rose to 5.006%, crossing the 5% threshold.
Asked whether he had spoken with President Trump, Chair Warsh underscored the Fed's independence, replying, "I am not Wall Street's newsletter" and "Independence goes both ways."
Regarding long-term rates fluctuating in the 5% range, Chair Warsh offered a diagnosis of multiple factors. He explained that the economy's solid footing, a surge in capital spending by hyperscalers, and the widening of crack spreads—the gap between spot commodity prices and product prices driven by geopolitical factors—had pushed up Treasury yields.
