Warsh Says Five-Year Inflation Fight Won’t End Fast as 30-Year Tops 5.2%: What Do Prediction Markets Say?
Federal Reserve Chairman Kevin Warsh held interest rates steady Wednesday for a fifth straight meeting, then told reporters that while the Fed "hasn’t done much in 42 days, the markets have done quite a bit." Pressed on whether the Fed was simply sitting still, Warsh insisted there was “nothing inertial” about their meeting. The vote was 9-3 and the target range for the funds rate stays at 3.5% to 3.75% while inflation runs above the Fed’s 2% target for a 63rd straight month. The three dissenters voted for a hike. The Bond Market Is Doing the Hiking The 30-year Treasury yield surged as Warsh spoke, jumping 12 basis points to 5.21%, its highest level in 19 years, per CNN. The long bond has now spent weeks above 5%, its longest run over that threshold since 2007. Warsh framed the move as a feature of his pullback from forward guidance. “Market participants are le...
Federal Reserve Chairman Kevin Warsh held interest rates steady Wednesday for a fifth straight meeting, then told reporters that while the Fed "hasn’t done much in 42 days, the markets have done quite a bit." Pressed on whether the Fed was simply sitting still, Warsh insisted there was “nothing inertial” about their meeting.
The vote was 9-3 and the target range for the funds rate stays at 3.5% to 3.75% while inflation runs above the Fed’s 2% target for a 63rd straight month.
The three dissenters voted for a hike.
The Bond Market Is Doing the Hiking The 30-year Treasury yield surged as Warsh spoke, jumping 12 basis points to 5.21%, its highest level in 19 years, per CNN.
The long bond has now spent weeks above 5%, its longest run over that threshold since 2007.
Warsh framed the move as a feature of his pullback from forward guidance. “Market participants are learning to play the ball, not the referee,” he said.
Skeptics may read the same tape differently.
A long bond above 5% while the Fed sits still suggests investors are demanding greater compensation for inflation and duration risk, and may doubt price stability will return quickly.
The Cato Institute’s Jai Kedia noted the three dissents mark the first time since 2016 that three members dissented in the same direction. “There is no apparent objective framework being used by FOMC members to make rate decisions,” he said in emailed comments, arguing the Fed should follow a policy rule rather than member discretion.
What Polymarket Says On Polymarket, traders now price an 89% chance the Fed delivers zero cuts in 2026, with the single-cut bracket down to 8%.
The chance of a rate hike this year has fallen to 64%, from 78% before the meeting.
Why Nvidia Investors Should Care Warsh singled out the AI capex boom as a complication, citing nearly 20% four-quarter growth in AI-related equipment and software spending.
The surge “is driving up prices of memory and logic chips, and associated AI infrastructure,” he said.
That places Nvidia (NASDAQ: NVDA ) and Micron Technology (NASDAQ: MU ) among the companies most exposed to the Fed’s AI inflation puzzle.
The same investment helping support economic growth could also complicate the path to lower interest rates if chip and infrastructure price pressures persist.
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