Summary of Post-FOMC Comment: Warsh Changes the Game, Fed Catches Its Breath

Date: 28 October 2026

Key Takeaways

• Lisa Cook surprised many by supporting a rate hike.
• The US dollar weakened slightly, and 2-year Treasury yields fell by 8 basis points to 4.70% after the meeting.
• The Federal Reserve plans to reduce interest rate decisions to seven per year in 2027 and six in 2028.
• Markets are pricing an 85% probability of a rate hike at the December meeting.

Market Reactions

The initial meetings under the leadership of Warsh have led to significant market volatility. However, as the economic picture becomes clearer, investor reactions are stabilizing. The October decision was anticipated for two main reasons:

1. The upcoming midterm elections, which will influence US economic and foreign policy.
2. The Fed's desire to avoid signaling that it is falling behind on inflation, which could lead to rapid monetary tightening.

Vote Breakdown

The vote was split 10-2, which was expected. Analysts had anticipated dissent from members like Beth Hammack, Lorie Logan, or Neel Kashkari. However, the inclusion of Lisa Cook in favor of a rate hike was unexpected, especially considering her controversial dismissal by Donald Trump in 2025, which was later deemed unlawful.

Warsh's Press Conference Insights

Warsh's statements during the press conference were vague but included two notable remarks:

• "There is broad agreement that monetary medicine is taking effect."
• "The economy is strong and moving in the right direction. Most of my colleagues do not view it as being 'overheated'."

These comments suggested a less hawkish stance than previously anticipated, contributing to a slight weakening of the US dollar and a decline in Treasury yields.

New Meeting Schedule

A significant announcement was the change in the FOMC meeting schedule starting in 2027. While there will still be eight meetings annually, not all will involve interest rate decisions. One meeting in 2027 will focus on strategic deliberations, and two meetings in 2028 will be set aside for this purpose, reducing the number of decisions to six per year.

Future Outlook

The decision made does not resolve the debate regarding the Fed's next move in December. While markets lean towards a rate hike, confidence has slightly decreased, with an 85% probability now priced in, down from 95%. Future actions will depend on various factors, including oil prices and capital demand from hyperscalers. Despite high Treasury yields, commercial and industrial loan growth remains strong, and trade liabilities are at their highest since the dot-com bubble.

Based on current data, an interest rate hike in December is expected to address inflation concerns, with subsequent actions likely influenced by midterm election results and the broader sentiment surrounding the AI revolution.