Kevin Warsh can’t reopen the Strait of Hormuz
The public is frustrated with the high cost of living, and the Federal Reserve is once again under pressure to act.
Fed Chair Kevin Warsh has made it clear that he wants inflation back to the central bank’s 2% target. Some investors believe the Warsh-led Fed could show it is serious about that commitment by signalling a more hawkish path, potentially opening the door to a future rate hike.
The challenge is that the Fed’s inflation-fighting tools are limited when inflation is being driven by supply shocks rather than demand.
CNN reports, the central bank cannot negotiate a ceasefire in the Middle East, reopen the Strait of Hormuz, or reverse the impact of tariffs and other supply disruptions that have pushed energy and goods prices higher.
As former Fed official Benson Durham, founder of DASM LLC, put it: “Rate hikes won’t keep the bombs from dropping.”
Cleveland Fed’s Beth Hammack says some business leaders are calling for higher rates
Cleveland Fed President Beth Hammack said she is hearing an unusual message from business leaders, with some now arguing that interest rates should be higher to bring inflation under control.
In a LinkedIn post published earlier this month, Hammack said it was the first time she had heard business executives openly favour tighter monetary policy, a notable shift given that companies typically support lower borrowing costs.
She also said she is hearing increasing financial stress from households, describing conversations with consumers who “can’t make ends meet” and reporting a growing sense of economic despair.
Peter Schiff warns a surprise Fed rate hike could hit risk assets
Gold advocate and macro commentator Peter Schiff said a surprise interest rate hike by the Federal Reserve could trigger a sharp market reaction, arguing that a serious effort to bring inflation under control would pressure both financial markets and the broader economy.
In a post on X, Schiff said that if the Fed unexpectedly raises rates and gold still rallies, it would suggest that investors are becoming increasingly concerned about the long-term inflation outlook. He argued that aggressive inflation-fighting measures could ultimately force the Fed to reverse course.
Schiff’s comments come as markets overwhelmingly expect the Federal Reserve to leave interest rates unchanged at Wednesday’s meeting, with traders focused instead on Chair Kevin Warsh’s guidance for the September policy meeting.
Economist Claudia Sahm says the Fed statement may point to a future rate hike
Economist Claudia Sahm believes the Federal Reserve’s post-meeting statement could signal that policymakers are moving closer to another interest rate hike if inflation does not continue to improve.
Sahm, chief economist at New Century Advisors, expects the statement to place greater emphasis on inflation risks despite Chair Kevin Warsh’s preference for limiting explicit forward guidance. She believes the Fed could indicate that further policy tightening may be warranted if inflation remains elevated while the labour market stays strong.
Her expectation comes after Warsh’s first FOMC meeting in June, when the Fed released a notably shorter statement that dropped much of the previous boilerplate language and instead focused on the committee’s commitment to restoring price stability.
Sahm expects the July statement to acknowledge that inflation remains above the Fed’s 2% target, with pressure coming from supply disruptions linked to the Middle East conflict, tariffs, and strong AI-related demand. She also expects the Fed to describe labour market conditions as broadly consistent with its maximum employment mandate.
Stocks and Treasury yields rise ahead of the Fed decision as oil adds inflation pressure
U.S. stocks opened sharply lower on Wednesday, while Treasury yields moved higher, increasing market pressure ahead of the Federal Reserve’s interest rate decision later this afternoon.
The Dow Jones Industrial Average fell nearly 400 points in early trading, with much of the weakness linked to a fresh jump in oil prices. The move followed renewed geopolitical tensions after President Donald Trump said the United States would respond forcefully to attacks on American personnel in the Middle East.
Bond markets also reflected growing inflation concerns. The 10-year Treasury yield rose to 4.62%, close to its highest level of the year, while the 2-year Treasury yield climbed to 4.30%, a level that is particularly important because it is highly sensitive to expectations for Federal Reserve policy.
Bitcoin, Ethereum, and XRP remain muted ahead of the Fed decision
Bitcoin, Ethereum, and XRP traded in a tight range on Wednesday as crypto markets remained largely subdued ahead of the Federal Reserve’s interest rate decision.
Bitcoin was holding around $63,900, down about 0.3% over the past hour, while Ethereum traded near $1,889 and XRP hovered around $1.06, according to CoinMarketCap. The muted price action suggests traders are avoiding large directional bets before the FOMC statement and Chair Kevin Warsh’s press conference.
Broader crypto sentiment also remained cautious. The Crypto Fear & Greed Index stood at 35, indicating fear, while the overall crypto market capitalisation was little changed near $2.18 trillion.
The lack of movement across Bitcoin, Ethereum, and XRP reflects a market that is waiting for a macro catalyst. A hawkish message from the Fed could strengthen the U.S. dollar and pressure risk assets, while any sign that policymakers are becoming more open to easing later this year could support a broader crypto rebound.
For now, the key takeaway is that the three largest traded crypto assets are holding steady, with volatility expectations remaining elevated ahead of the Fed announcement.
Fed expected to keep rates unchanged as inflation remains the key concern
Federal Reserve policymakers are showing growing frustration with persistent inflation, but they are not expected to turn that frustration into action at this week’s meeting. The central bank is widely expected to keep its benchmark interest rate unchanged when the Federal Open Market Committee concludes its two-day meeting in Washington on Wednesday.
The more important question for markets is whether Chair Kevin Warsh signals that the Fed is moving closer to a policy shift at its next meeting on September 15-16.
Inflation has remained above the Fed’s 2% target for more than five years, and Warsh has adopted a notably firm tone since taking over as Fed chair. Earlier this month, he told Congress that he has “no tolerance” for elevated inflation, reinforcing expectations that future meetings could become more consequential if price pressures remain stubborn.
This is Warsh’s second FOMC meeting as chair, making his post-decision press conference a major event for financial markets. Investors will be watching closely for any change in the Fed’s inflation assessment, the outlook for future rate cuts, and comments that could move Treasury yields, the U.S. dollar, and crypto assets.
Warsh is scheduled to hold a news conference at 2:30 p.m. EDT, and his remarks could shape expectations for the September meeting even if the Fed leaves rates unchanged today.
Also Read: What to Expect From the July FOMC Meeting?
