New Fed Chair Noncommittal on Interest Rates, Emphatic on Central Bank Independence

If Kevin Warsh didn’t just get a new gig, we might suggest he become a professional boxer since he can sure bob and weave. 

At the ECB Forum on Central Banking on Wednesday, the Fed chair managed to dodge questions about what we can expect from interest rate moves at the Federal Open Market Committee’s July meeting. It seems he’s trying to keep the conversation focused on inflation — that it’s still too high but is posing less of a risk than it did even a few weeks ago. Energy prices in particular, he noted, have come down “quite substantially.” 

Warsh Watch  

Since taking over from Jerome Powell in May, Warsh has had Wall Street’s ears glued to every word he’s said about the economy and what it could mean for borrowing costs, while the market’s eyes are glued to the data. This week, the statistics included employment numbers from ADP, which showed that private-sector hiring in June was lower than economists expected. Those economists will be closely watching the Bureau of Labor Statistics’ jobs report coming out this morning as well, especially because the employment picture is a “wild card,” according to Dominic Pappalardo, chief multi-asset strategist for Morningstar Wealth. 

The many market watchers keeping up with these figures and what they mean for interest rate projections are probably getting some whiplash: 

• Coming into 2026, roughly two rate cuts were priced in by the futures market. Now, CME’s FedWatch tool indicates we’ll probably see a hike by the end of the year. 
• “The main driver of that has been the sustained increases we’re seeing in inflation,” with a lot of that inflation increase driven by the surge in energy prices due to the conflict in the Middle East, Pappalardo says. Looking ahead, weakness in the labor market could delay the Fed rate hike markets are expecting, he adds. 

Fed Independence: Warsh may be a man of few words, but one thing he seems to want to make clear is that the decision to raise or cut interest rates will be made by the central bank and the central bank alone. “We’ve been an independent central bank for a very long time,” Warsh said at the ECB conference when asked whether he would take President Donald Trump’s calls for cuts into account. “We’re going to be an independent central bank at this moment, and you’re going to see no changes on that.”