ANZ: FOMC Hawkish Patience Under Warsh - FJElite

Kevin Warsh’s first FOMC meeting is expected to reinforce a more hawkish tone, even if rates stay unchanged. The key shift is likely to come through communication, with the Fed expected to remove any remaining easing bias and stress that policy is not on a pre-set path. The message would be that inflation is still too high, uncertainty is elevated, and patience is required, but the Fed is willing to respond if inflation risks worsen.

The broader backdrop is a split economy. AI and chip-related investment are driving a growing share of activity, while household demand and other parts of investment remain much softer. Inflation is still above target, but much of that is being driven by one-off factors such as energy and tariffs rather than broad-based demand pressure. That leaves the Fed focused on inflation for now, but still likely to stay on hold through the end of Q4 unless price pressures become more persistent.