Markets price in a hawkish Warsh Fed after inflation remarks

Financial markets adjusted sharply after Federal Reserve Chairman Kevin Warsh signaled a strong focus on fighting inflation during his first news conference. Traders pushed up expectations for possible rate hikes in the coming months, while Treasury yields rose and stocks initially fell before later recovering. Warsh, appointed by President Donald Trump, emphasized price stability and said the Federal Open Market Committee would act to control inflation, which has stayed above the Fed’s 2% target for years. That message led investors to rethink the outlook for interest rates, with futures markets assigning higher odds to a hike as early as the summer meeting and even more tightening over the longer term. Some analysts said the response may have been stronger than the Fed ultimately intends. They noted that underlying inflation has eased in recent months, commodity prices have declined from earlier highs, and the central bank may wait to see how economic conditions develop before making any move on rates.