Federal Reserve: Warsh era begins with hawkish tilt – Deutsche Bank

Deutsche Bank’s US economists expect the first Federal Reserve meeting under Chair Kevin Warsh to keep rates unchanged but shift guidance. They anticipate removal of the prior easing bias and a dot plot that no longer signals a 2026 rate cut, while fed funds futures now price modest additional hikes as markets scale back expectations for dovish rhetoric.

New Chair seen dropping easing bias

"Speaking of central banks, attention today will be firmly on the Federal Reserve’s decision, which is the first with Kevin Warsh as the new Chair."

"They’re widely expected to keep rates on hold, but a new Chair often leads to higher volatility at first, because the market is trying to work out their communication style and reaction function."

"So it could still be an eventful one, even without a change in rates."

"In terms of what to expect, our US economists think the statement will drop the easing bias from last time, and expect the median dot will no longer signal a rate cut this year, as the last one did in March."

"In terms of the latest market expectations on the Fed, fed funds futures are pricing 21bps of hikes by year-end, with this pricing actually rising +1.3bps yesterday despite the broader rates rally as expectations for any dovish rhetoric from Warsh appear to have eased."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)