Kevin Warsh, newly installed as Federal Reserve Chair, signaled a hawkish stance focused on price stability following his first policy meeting on June 17, where the Fed kept interest rates steady at 3.50%–3.75% [1, 2, 3]. Warsh stressed that "price stability is the foremost priority. Persistent high prices are a burden on Americans," highlighting inflation concerns as the May Personal Consumption Expenditures (PCE) inflation gauge rose 4.1% year-over-year, more than double the Fed’s 2% target, with core PCE inflation at 3.4% [1, 4].

US Treasury Secretary Scott Bessent voiced strong confidence in Warsh’s ability to manage the balance between inflation and economic growth independently of political pressures. Speaking June 23 at the Economic Club of New York, Bessent said, "I am confident that the Fed chair will optimise the path for both inflation and economic growth. He will remain independent and do the right thing." He added that with the recent Senate vote to end US conflict with Iran, "gas prices will come back down, inflation will come back to target" [1, 5]. Despite President Donald Trump publicly advocating lower rates, he expressed trust in Warsh’s independence, stating, "I want him [Warsh] to do the right thing, that’s why I picked him" [1, 5].

Markets are divided on the outlook for Fed policy this year. While some, including HSBC, predict interest rates will remain steady through 2026 and 2027, banking giants like Bank of America and Deutsche Bank forecast two to three rate hikes in 2026 totaling 50 to 75 basis points. Bank of America expects three hikes amounting to 75 basis points [6, 7, 2, 8, 3, 9]. The divergence reflects differing views on inflation dynamics and US economic growth.

Bond markets suggest that long-term inflation expectations may be easing, with the 10-year breakeven inflation rate falling from over 2.5% to about 2.2% [4]. Warsh’s hawkish tone has also weakened demand for traditional inflation hedges such as gold and bitcoin, strengthening the US dollar [10, 4, 8]. JPMorgan’s Meera Chandan noted, "If the Fed leans toward raising rates, it’s hard to engage in debasement trades" [10].

Meanwhile, HSBC and UBS highlighted the role of AI, energy, and defense sectors in driving global economic growth, with Taiwan and South Korea positioned to benefit from rising capital expenditure tied to AI demand. HSBC forecasts US GDP growth of 2.1% to 2.5% for 2026, underpinned by productivity gains that could moderate inflation pressures [6, 7, 11, 2, 12]. UBS’s Hu Junli stated, "Taiwan and Korea will continue benefiting from AI-related demand and capital spending" [12]. Asian equity markets have remained volatile amid geopolitical risks but showed historic highs in Taiwan’s stock index on June 22, reaching 47,741.51 points [2, 8, 12].

Warsh’s next opportunity to influence policy will be the Fed’s July meeting, where market watchers will scrutinize whether his hawkish rhetoric translates into rate hikes after the June pause.