Kevin Warsh, whom President Trump installed as Fed Chair, held his first Federal Open Market Committee meeting on June 16–17. The committee voted 12-0 to hold the benchmark federal funds rate at 3.5%–3.75%. But the hold was the least interesting part: nine of eighteen FOMC members now project at least one rate hike before year-end, and six of those nine want two quarter-point increases. The Fed also dropped the language it had used for months suggesting the next move would be a cut. Annual inflation sits at 4.2% — a three-year high, five years running above the Fed's 2% target. The 2-year Treasury yield jumped 16 basis points on meeting day — the biggest Fed-day move since March 2008.

1. Warsh Is Done Waiting (Kevin Warsh, Seema Shah at Principal Asset Management)

Warsh treats this as a credibility problem, not a temporary blip, and the dot plot is the proof.

Half the committee is now pointing at hikes. Five years of missed targets — with annual CPI now at 4.2% and core PCE rising from 3.0% to 3.3% between December 2025 and April 2026 — have convinced a majority of the FOMC that holding rates isn't enough. Nine of eighteen members expect to tighten further this year; six of those want two increases.

Warsh's commitment pledge was the headline. At his press conference, he said: "The commitment to deliver is strong, unanimous, and unambiguous, and that's I think an important message we've missed for five years, and we're going to fix that." He was talking about the Fed's failure to credibly signal its resolve — not just the missed targets — and the markets heard it as a hike signal.

He also eliminated forward guidance. Warsh dropped the statement language about future rate paths, saying "as a general proposition, forward guidance isn't the business we should be in." He declined to submit his own dot-plot forecast, setting himself apart from all other FOMC members. The Fed announced five task forces to overhaul its communications framework.

A few more hot inflation prints and the hike becomes real. Seema Shah, Chief Global Strategist at Principal Asset Management, said the Fed "may be just a few strong inflation and jobs releases away from tightening."

2. But Trump Wanted Cuts (President Trump, Treasury Secretary Scott Bessent)

Trump installed Warsh to bring rates down. The first meeting went the other direction.

The frustration was audible — just uncharacteristically quiet. Speaking from Paris during the G7, Trump called higher rates the thing that "just keeps the country down" — his familiar framing. Then, publicly deferring: "We have a very good guy over there right now, so I'm guided by what he wants." This is the same president who attacked Jerome Powell for years. At Warsh's swearing-in in May, he had told him: "Don't look at me, don't look at anybody. Just do your own thing and do a great job."

The whole White House bet rests on disinflation arriving soon. Treasury Secretary Scott Bessent told CNBC on May 14 that after "one or two more hot inflation numbers, I think we're going to see substantial disinflation," adding: "Nothing is more transient than a supply shock." His case: oil peaked at $113 per barrel during the Iran war in April and has since fallen to $76. If inflation tracks oil lower, the hawkish dot plot will look premature.

The underlying tension is real. The same meeting that produced nine rate-hike dots also cut the GDP growth forecast from 2.4% to 2.2%. The White House bet is that supply shocks fade on their own — and that the Fed Warsh built will pivot to cuts when they do. The FOMC's hawkish lean says the Fed isn't waiting to find out.

3. And Rate Hikes Won't Fix What Tariffs Broke (The Economy Editorial Board, Goldman Sachs)

Rate hikes don't fix inflation caused by tariffs and war — they just add recession risk on top.

Rate hikes won't fix inflation that tariffs created. The Federal Reserve's own research found that without tariffs, inflation would have dropped to pre-pandemic levels during 2025. Trade and war policy — not consumer demand — created the inflation the Fed is now fighting. A rate hike is the right tool for the wrong disease.

The trap is structural, not cyclical. The Economy editorial board put it in a May 2026 analysis: "Monetary policy cannot address a cost shock that trade policy sustains." Running tariffs while simultaneously demanding cheaper credit "is effectively asking monetary policy to offset the inflation you are bringing into being." The board also warned that cuts carry their own risk — premature easing could "underpin higher inflation expectations and erode faith in the currency."

A hike is still the minority outcome. Market odds have risen to around 20%, but Goldman Sachs economists argue the Fed has historically looked through supply and energy shocks — and this one, with oil already falling from $113 to $76, fits that pattern. Tightening into a slowing economy — GDP revised down to 2.2%, unemployment at 4.3% — is a real risk: slower growth plus persistent cost-push inflation is stagflation, and rate hikes accelerate the growth slide without fixing prices.

Where This Lands

Warsh has a hawkish majority on the committee and credibility to protect. If the next inflation prints hold above 4%, a September rate hike becomes a live decision. Bessent and the White House are betting that falling oil prices crack the inflation numbers first, forcing the Fed to pivot before it pulls the trigger. The stagflation camp argues both bets miss the point: as long as tariffs run, the Fed is choosing between damaging growth and losing credibility, and neither fixes the underlying problem.

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