TLDR
- Kevin Warsh was sworn in as Federal Reserve chairman on Friday, replacing Jerome Powell after a 54-45 Senate vote.
- Investors now see zero chance of a rate cut in 2026, with rate hike odds rising sharply.
- CME FedWatch data shows a 70% chance of a rate increase at the December 2026 FOMC meeting.
- Some economists believe the Fed could raise rates by up to 100 basis points if inflation stays above 2%.
- Warsh’s first policy meeting as Fed chair is scheduled for June 16-17.
Markets have shifted sharply toward expecting rate hikes in 2026 now that Kevin Warsh has officially taken the helm of the Federal Reserve.
JUST IN: 🇺🇸 Kevin Warsh has officially been sworn in as the new chair of the Federal Reserve, replacing Jerome Powell. pic.twitter.com/H8l0qIRX9t
— CoinMarketCap (@CoinMarketCap) May 22, 2026
Warsh was sworn in on Friday at the White House by Supreme Court Justice Clarence Thomas. He replaces Jerome Powell after a narrow 54-45 Senate confirmation vote that split along party lines.
At the ceremony, President Donald Trump said he wants Warsh to act independently. “I want Kevin to be totally independent and do a great job. Don’t look at me and don’t look at anybody. Just do your own job,” Trump told the new Fed chair.
Trump had faced weeks of criticism from Democrats who questioned whether Warsh would protect the Fed’s independence. Senator Elizabeth Warren had called him a “sock puppet” for the president. Warsh rejected that label and pledged to make independent decisions on monetary policy.
Trump also told the audience that employment numbers are at record levels and that the country can grow its way out of its debt problem. “We want to stop inflation, but we don’t want to stop greatness,” he said.
Markets Price In Hikes, Not Cuts
Despite Trump’s desire for lower rates, markets are pricing in a very different outlook. According to CME FedWatch data, there is now a 0% chance of a rate cut anywhere in 2026.
Only 3.5% of investors see a small rate hike at the next FOMC meeting on June 17. But by July, the probability of a hike rises to 17%.
The most watched data point is December. Around 67% to 70% of investors now expect a rate increase at the final FOMC meeting of 2026. The most likely outcome is a hike to the 375-400 basis point range, which would represent a 25 basis point increase from the current target of 350-375 basis points.
Some economists go further. If inflation stays above 2%, they believe the Fed could raise rates by as much as 100 basis points in total. That would reverse the three rate cuts made during 2025.
Fed Shifted Tone Before Warsh Arrived
April FOMC meeting minutes showed the shift was already happening before Warsh took over. Officials said that “some policy firming would likely become appropriate if inflation were to continue to run persistently above 2%.”
The minutes also showed that many participants wanted to remove language that signaled a bias toward cutting rates.
Inflation concerns are partly tied to rising oil prices, an AI-driven demand surge, and ongoing tensions linked to the US-Iran conflict.
Longer-term markets are also moving. For June 2027, traders see only a 15.8% chance that rates stay at 350-375 basis points. Instead, 33.4% expect rates at 375-400 and another 30.2% expect 400-425. Some bets even reach as high as 500-525 basis points.
Rate hikes are generally negative for risk assets. Bitcoin, crypto, and equities could all face headwinds if borrowing costs rise over the next year.
Warsh’s first policy meeting as chairman begins June 16.
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