Fed Watch
The Fed, inflation and rate markets — tracked daily.
30-day review of this series 6/18 – 7/18
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Hawkish FOMC debut and the disinflation counterwave: Chair Warsh’s June meeting—a 9-9 dot-plot tie for 2026 hikes, stripped forward guidance, and sharply higher inflation forecasts—triggered a violent repricing of rate expectations. Over the following weeks, soft June CPI and PPI readings collapsed July hike probability to near 11%, but a wall of Fed speakers (Logan, Jefferson, Schmid) warned against declaring victory, keeping the standoff alive.
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Labor market softening tests the hawkish consensus: The June payrolls miss of +57k—well below consensus—undermined the “employment overheating” pillar and pushed the first fully priced hike from October to December. Yet the FOMC minutes and subsequent official commentary continued to emphasize inflation persistence, preventing a full dovish pivot.
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Warsh’s communication overhaul raises volatility: The new chair abolished forward guidance, slashed the FOMC statement to 130 words, and launched five task forces to review communication, balance sheet, and data use. This structural shift made every data release and meeting a “live” event, amplifying market sensitivity to incoming prints.
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Dollar and rate-path divergence widens: The dollar rallied to a one-year high on the hawkish repricing, then retreated as disinflation data emerged, while BofA’s three-hike forecast stood in stark contrast to market pricing of less than one hike. The gap between institutional forecasts and market pricing remained the widest in the cycle.
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Global central bank divergence intensifies: The BOJ raised rates to 1.0% and signaled further hikes, the ECB resumed tightening, and the BOE held, while the Fed’s uncertain path created asymmetric cross-currents for EM FX and carry trades, with the yen carry trade reaching 2008-level risk.
July 2026
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〈BofA Reinforces Three-Hike 2026 Call as Warsh Hawkish Testimony Offsets CPI Disinflation; Leveraged ETF Deleveraging and Hedge Fund Treasury Concentration Highlight Fragility; Oil Surges 16% to $88〉
BofA maintains a three-hike 2026 forecast (September–December) citing hawkish Fed officials and strong growth momentum; Warsh's testimony offsets the benign June CPI, keeping September hiking odds at ~53%; leveraged ETF deleveraging (-13% AUM from peak) and hedge fund Treasury concentration ($2.5tn, doubled) signal systemic fragility; BOK hiked 25bp to 2.75%; Brent crude surged 16% weekly to $88/bbl on Middle East tensions.
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〈Warsh and Waller Maintain Hawkish Tone; Oil Surge to $88 and BEA Revamp Complicate September Hike Debate; CME FedWatch Puts September Hike at 59% vs Kalshi Unchanged〉
Warsh and Waller reiterate hawkish stance; Brent surges 16% to $88/bbl on Middle East tensions; BEA plans statistical revamp that will lower PCE readings; CME FedWatch September hike probability at 59% diverging from Kalshi unchanged expectations; UBS recommends SOFR receiver and long inflation swaps; real rates continue to rise while inflation expectations fall to four-year low.
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〈Hammack Hawkish Remarks Reinforce Caution Amid Soft Inflation Data, July Hold Probability at 85.6%; Global CB Divergence Widens with BOK Hike to 2.75%〉
Cleveland Fed President Hammack delivered hawkish remarks stressing broad-based and persistent inflation, while June CPI/PPI disinflation data pushed July hold probability to 85.6% and Morgan Stanley argued the market misread Waller's speech; Deutsche Bank raised its 10-year yield forecast to 4.80% on a hawkish Fed path, and the Bank of Korea hiked 25bp to 2.75% in a widening global tightening cycle.
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〈Fed Officials Push Back Against CPI-Induced Dovish Pivot; Market Still Prices 89% Hold; BOJ Likely to Hold Rates Steady〉
A chorus of Fed officials — Logan, Jefferson, and Schmid — pushed back against the CPI-induced dovish repricing, with Logan explicitly advocating for "modestly higher interest rates" and Jefferson warning that a "rapid series of shocks could entrench inflation," while the market still prices a July hold at 89% and has slashed end-2026 hike pricing to 27bp; BofA maintains its three-hike forecast, and the BOJ is expected to keep rates unchanged at its July meeting, reinforcing policy divergence.
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〈PPI Disinflation Bolsters Hold Case, but Warsh and Cook Push Back on "Mission Accomplished"; July Hike Probability Collapses to ~11%〉
June PPI fell 0.3% m/m, well below expectations, reinforcing the disinflation narrative and collapsing the July hike probability to ~11%, but Fed Chair Warsh's testimony emphasized the inflation fight is "far from over," and Governor Cook warned that risks have shifted toward higher inflation — leaving the policy narrative in a tug-of-war between data and rhetoric; the Beige Book confirmed moderate economic expansion but with rising cost pressures and consumer pullback.
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〈June CPI Miss Triggers Sharp Dovish Repricing; Warsh Testimony Pushes Back — July Hike Probability Collapses to ~20%〉
June CPI came in well below expectations (headline +3.5% y/y, core +2.6% y/y), collapsing July hike probability from ~50% to ~20% and triggering a bond rally (2-year -14bp to 4.14%), but Chair Warsh's hawkish congressional testimony — stressing zero tolerance for inflation and downplaying the data as "one data point" — partially reversed the rally, leaving the 10-year at ~4.59% and the dollar recouping half its post-CPI loss; the regime remains binary with PPI and the second day of testimony ahead.
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〈Waller Triggers a Hawkish Pivot — July Hike Probability Surges to ~50%, CPI and Warsh Testimony as Binary Catalyst〉
Fed Governor Waller's hawkish speech — explicitly linking another hot core inflation print to a near-term rate hike — pushed July hike probability from <10% to ~50% and the 2-year yield to a year-high 4.28%, while Brent crude surged ~10% on escalating US-Iran hostilities; all eyes are on today's June CPI and Warsh's congressional debut as the binary catalysts.
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〈Warsh Testimony and CPI as Binary Catalysts Amid Growing Internal FOMC Tension; BofA Bull-Bear Indicator Triggers Sell Signal〉
With Chair Warsh's semi-annual congressional testimony and June CPI data both due Tuesday, the market faces a binary week; WSJ reports growing internal Fed tension over rate hikes, BofA's Bull & Bear Indicator triggered a sell signal, and the consensus of "no landing, no rate cuts, no rate hikes, no AI capex cut, no Democratic sweep" is described as extremely fragile.
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〈Warsh Testimony and CPI Loom as Dovish Signals Mount; July Hike Probability at 24%〉
With market-implied July hike probability at just 24% and a Bloomberg economist arguing the market does not truly believe the Fed will act, Chair Warsh's testimony alongside June CPI next week is the binary catalyst; Warsh's flexible interpretation of the 2% target and Trump/Bessent pressure reinforce the dovish narrative, while Goldman sees rate-vol upside risk as the new communication framework takes shape.
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〈Fed Semiannual Report Reaffirms Anti-Inflation Tone, Highlights AI/Tariff Pressure; TIPS Yields Rise on Declining Inflation Worries〉
The Fed's semiannual Monetary Policy Report to Congress reiterated its commitment to price stability with inflation still well above target, citing tariffs, the Iran war energy surge, and AI-driven investment as persistent upward pressures, while noting trimmed-mean PCE has declined — a nuanced message that keeps the September hike probability near 51%; Warsh's perceived anti-inflationary tone in early days adds hawkish tail, while declining inflation worries over the past month have pushed TIPS real yields higher, creating an increasingly attractive lock-in for equity profits.
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〈Williams Flags AI-Driven Inflation Risk, Warsh Names Task Force Leaders; Bear-Steepening and Term-Premium Repricing Intensify〉
New York Fed President Williams warned that sustained AI-driven demand could force rate hikes, while Chair Warsh announced the leadership of five external task forces to overhaul central-bank operations — the FOMC minutes showed a committee evenly split on the rate path, and the 30-year Treasury yield rose above 5.0% as a bear steepener and supply fears drove long-end yields higher.
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〈FOMC Minutes Confirm Data-Dependent Stance, Oil Surges on Iran Truce Collapse Risk; Hawkish and Dovish Cross-Currents Intensity Ahead of CPI〉
The June FOMC minutes, released as-expected, confirmed a data-dependent Fed split on future direction — most see steady or lower rates if inflation fades, but most also flagged persistent inflation scenarios warranting tightening — while Trump's warning that the Iran truce may collapse sent oil surging 4%+ and yields up, re-introducing an energy-shock tail risk; New York Fed consumer inflation expectations rose to a multi-year high, Waller and Williams gave divergent readings on the inflation outlook, and HSBC recommends buying 30-year TIPS as long-end real yields near 2.87%.
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〈FOMC Minutes Released, New York Fed Inflation Expectations Surge, Oil Spike on Iran Ceasefire Collapse; Dollar and Rate-Hike Pricing Under Debate〉
The June FOMC minutes, released without the usual detail under Warsh's minimalist approach, offered limited new signals, while a New York Fed survey showing one-year inflation expectations at a nearly three-year high and Trump's declaration that the Iran ceasefire is "over" pushed oil and bond yields higher; Williams struck a dovish tone on energy prices, and Morgan Stanley argues that a soft CPI next week could flip the entire rate-hike narrative to cuts.
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〈Waller Defends Flexible Forward Guidance, Dollar Positioning at Record High; FOMC Minutes and CPI Awaited〉
Fed Governor Waller delivered a nuanced defense of flexible forward guidance in Rome, contrasting with Chair Warsh's push for minimal guidance, while CFTC data showed USD net long positions at their highest since 2015 (~$40bn), signaling extreme consensus positioning that a weak payroll print could violently unwind; the near-term binary catalysts are Wednesday's FOMC minutes and next week's CPI.
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Payrolls Miss and Warsh Dovish Tone Cement Dovish Repricing; Focus Shifts to FOMC Minutes, ISM Services, and CPI for Confirmation
The June payrolls miss (57k) and Chair Warsh's stated decline in inflation risks anchor the dovish repricing, with CME July hike probability falling to 23% and gold recovering above $4,100; the market now awaits this week's FOMC minutes (July 8), ISM services data, and next week's CPI to validate whether the disinflation narrative is durable, while Citadel Securities warns that the market underestimates the July hike risk.
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Payrolls Miss Consolidates Dovish Repricing; Warsh Framework Shift Adds Structural Nuance
The June nonfarm payrolls miss (57k vs ~113k consensus) continues to anchor the dovish repricing, with September hike probability falling to ~53.5% and the market pushing the fully-priced-in hike from October to December, while a growing chorus of analysts — including Chinese sell-side houses — argues that Chair Warsh's underlying framework shift from ample to scarce reserves constitutes a ~50bp implicit tightening, reducing the need for explicit rate hikes and opening the door to Q4 2026 rate cuts.
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Payrolls Miss Dovish Repricing Consolidates; Fed Minutes and Next CPI Are the Catalysts
June payrolls (+57k) miss continues to anchor the dovish repricing with September hike probability falling to ~53%, but French chief economists still expect a hike this year and OIS markets price one full hike; gold bounced above $4,000 on short-covering, USD volatility remains underappreciated, and next week's FOMC minutes (July 8) are the next policy-signal event.
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June Payrolls Miss Triggers Hawkish Repricing Unwind; Front-End Hike Probability Collapses as Warsh Confirms Inflation Risks Have Declined
June nonfarm payrolls added just 57k (consensus ~110k), with large downward revisions and a labor-force participation drop, collapsing the July hike probability from ~31% to ~18% and September from ~64% to ~52%, while Warsh confirmed at Sintra that inflation risks have declined over the past four weeks — the combination of a soft jobs report and a dovish-leaning Chair is the first major test of the post-June-FOMC hawkish repricing, with Citi now calling for October rate cuts.
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Warsh Strikes Dovish Tone on Inflation, ADP Miss Triggers Gold Bounce and Front-End Repricing; All Eyes on June NFP Binary
Fed Chair Warsh struck a dovish tone on inflation at the ECB Sintra forum — acknowledging that inflation risks and expectations have declined over recent weeks — even as he reiterated no early easing roadmap and refused to signal the July meeting; the ADP employment miss (98k vs 118k consensus) triggered a front-end repricing, with July hike probability falling to ~28% and gold bouncing back above $4,000; the June nonfarm payrolls report is the next binary clearing event, with BofA scenario analysis showing asymmetric tail risks — a weak print could trigger sharp CTA short-covering in front-end rates.
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Hammack Hawkish Salvo Drives Yield-Curve Flattening, Front-End Hike Probability Holds at ~34% Ahead of NFP Binary
Cleveland Fed President Hammack delivered a concentrated hawkish message — inflation remains broad-based and too high, raising the possibility that "higher rates may be needed" — pushing the 2-year yield above 4.17% and flattening the curve, even as market-implied July hike probability stayed near a minority ~34%; Warsh is set for his first international speech later today at Sintra, and Thursday's nonfarm payrolls (UBS expecting +80k vs consensus +110k) are the next binary pivot for the hawkish repricing.
June 2026
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Gold Crashes Through $4,000, Fed Independence Confirmed by Supreme Court as Hawkish Consensus Begins to Fracture
Gold's 12.4% monthly crash below $4,000 and futures-implied rate hike expectations retreating from 1.556 to 1.262 signal growing fragility in the hawkish consensus, even as the Supreme Court ruling affirming Fed independence and Fitch's persistent-inflation warning keep the September hike narrative alive at ~64% probability.
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Warsh Task Force Details Imminent, Rate-Path Divergence Widens as BofA and UBS Stakes Diverge Sharply; Dollar Strength Tests Global Liquidity
A growing analytical chasm opens on the rate path — BofA holds to three hikes while UBS predicts no move through 2026 and a March 2027 cut — as Warsh prepares to unveil five task force details in coming weeks; the dollar holds near 101.4 after hitting a 13-month high, but the Nasdaq's 4.6% weekly decline and a 130bp collapse in short-dated inflation breakevens signal a fragile disinflation narrative that challenges the hawkish consensus.
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Oil Collapse and In-Line PCE Data Fuel Bond Rally, Disinflation Narrative Strengthens; Williams Stays Hawkish on Inflation
The combination of plunging oil prices (WTI breaking below $70) and a May PCE reading that met consensus has sustained a bond market rally — the 10‑year yield fell under 4.4% and TLT gained 5% from its low — while market pricing of a September rate hike declined to ~59%; NY Fed's Williams warned inflation will not return to 2% until 2028, and a sharp Mag 7 drawdown signals K‑shaped stress in tech‑heavy sectors.
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PCE Data Delivers Below-Expected Core Reading, Easing Near-Term Hawkish Pressure; Gold Breaches $4,000, Dollar Rally Pauses
The May core PCE monthly increase of 0.4% came in *below* the 0.5% consensus, prompting traders to trim July rate-hike probabilities from ~40% to ~30% and pushing the 2-year yield toward 4.09%, but annual core PCE of 4.1% (a multi-year high) caps the dovish repricing; NY Fed's Williams sees inflation moderating, Chicago's Goolsbee flags persistent price pressure, and the cross-currents leave the September hike narrative intact (~50% probability) while creating a tactical window for risk parity to increase bond duration.
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PCE Data Day: Hawkish FOMC Repricing Faces First Live Test; Gold Breaks $4,000, Yield Curve Disinverts Real Rates; BOJ Summary Shows Accelerated Hike Calls
Today's May PCE release is the first live test of the Warsh-era Fed's hawkish repricing — consensus expects core to accelerate to 3.4% YoY, extending a regime where the market prices ~40bp of 2026 hikes while gold has crashed 29% from its January high; the San Francisco Fed's event-study data confirms this was the largest hawkish FOMC surprise since tracking began in 2020, and the BOJ's June meeting Summary showed a markedly more hawkish tone, with multiple members calling for faster rate hikes.
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Hawkish Repricing Consolidates Ahead of Thursday's PCE Binary; BofA and Deutsche Bank Lock In 3-Hike and 2-Hike Forecasts, Goldman Sees 50% July Probability; Dollar at One-Year High, Gold Forecasts Slashed
The hawkish repricing consolidates ahead of Thursday's May PCE data — BofA now expects three 25bp hikes this year, Deutsche Bank expects two, Goldman Sachs sees 50% July-hike probability, and OIS markets price a 37% July chance and 50% September chance; the dollar hit a one-year high, Goldman cut its year-end gold forecast to $4,900, and the Warsh communication vacuum is increasingly flagged as a structural volatility risk.
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Hawkish Repricing Deepens: BofA Now Expects Three Hikes, OIS Prices 36% July Hike Probability; PCE Data on Thursday the Next Clearing Event
BofA abruptly escalates to a three-hike forecast (Sep/Oct/Dec), OIS prices 36% probability of a July hike and 98% for September, while the 10-year real yield rebounds to 2.26% and the dollar index holds near 101; Citi remains the contrarian pole, forecasting cuts; Thursday's core PCE data is the binary event.
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Hawkish Repricing Deepens: BofA Turns Hawkish with 3-Hike Forecast, FedWatch Shows Sep Hike >70% Probability; PCE Data on Thursday the Next Pivot
Hawkish repricing extends: BofA joins Deutsche Bank in forecasting hikes, FedWatch now prices >70% probability of a September move, and 2-year yields hit 4.22%; Citi remains the lone dove expecting cuts; May PCE data on Thursday is the next clearing event.
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Hawkish FOMC Signals Fully Digested; Market Split on Overreaction vs. Structural Tightening; PCE Data Next Clearing Event
The hawkish FOMC signals are fully digested: markets now price 1.53 rate hikes this year and >70% probability of an October move, but a growing sell-side cohort argues the repricing overreacts to a one-off energy shock, while Warsh's structural overhaul — stripping forward guidance and launching five task forces — has permanently raised the volatility regime; May PCE data on Thursday is the next clearing event.
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September Hike Fully Priced; Equities Rally Paradoxically as Falling Oil and Breakevens Challenge Hawkish Repricing
Markets fully price a September rate hike while equities rally on falling oil and collapsing breakeven inflation rates; Goldman Sachs and Morgan Stanley call the hawkish repricing overdone, Deutsche Bank diverges with a 50bp hike call, and Warsh's new communication regime enters effect.
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Warsh's Hawkish Debut Shocks Markets — Dot Plot Implies Hike, Forward Guidance Abolished, Repricing Sharp
Chair Warsh's first FOMC meeting delivered a decisively hawkish outcome — a 130-word statement stripped of forward guidance, a dot plot showing 9 officials favoring a 2026 rate hike, and dramatically higher inflation forecasts — triggering a sharp repricing of rate expectations, a 2-year yield surge, and a broad selloff across equities and gold.
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FOMC Day: Warsh's First Meeting Delivers Hawkish Shock — Dot Plot Flips to Hikes, Forward Guidance Abolished, Market Reprices Sharply
The June 2026 FOMC meeting under new Chair Kevin Warsh delivered a decisively hawkish outcome — the dot plot flipped from March's cut signal to a 9-9 tie on hikes, inflation forecasts were raised sharply, the easing bias was removed, and forward guidance was abolished — triggering a steep repricing of rate expectations (September hike now >50% probability), a 2-year yield spike to 4.20%, a USD breakout above 100, and equities/gold selling off, while the abolition of forward guidance structurally increases FOMC-day volatility going forward.
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FOMC Day: Warsh's First Meeting — Hawkish Statement Expected, Dovish Presser Binary, Iran Deal Provides Cushion
The FOMC meets today with Chair Warsh's first press conference — a hawkish statement (removal of easing bias, higher SEP, no 2026 cuts) is nearly universally expected, but Warsh's dovish lean on AI/disinflation creates a binary risk; the Iran peace deal's oil collapse provides a disinflationary cushion that could sustain the bond rally if Warsh strikes a patient tone.
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FOMC Day Begins: Iran Deal Rally Continues, But Hawkish Statement vs Dovish Warsh Binary Awaits
Markets continue to digest the US-Iran peace deal, further reducing rate-hike expectations, but the FOMC meeting starting today with Kevin Warsh's first press conference is the key binary event — the statement is expected to remove the easing bias while Warsh may strike a dovish tone, creating cross-asset volatility risk.
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Iran Peace Deal Triggers Bond Rally, Reversing Hawkish Repricing Ahead of Warsh's First FOMC
News of a US-Iran peace agreement triggered a sharp bond rally and cut rate-hike expectations, directly reversing the past week's hawkish repricing — but the FOMC statement is still expected to remove the easing bias and raise SEP inflation forecasts, creating a binary risk around Warsh's press conference tone.
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Core CPI Miss Tempers Hawkish Repricing; FOMC Week Dominates Focus
May core CPI came in below expectations, pushing the first fully priced rate hike to March 2027 and allowing yields to fall for the week, but PPI headline surged and two FOMC officials signaled hawkish leanings — the narrative is a modest easing of hawkish extremes rather than a dovish pivot, keeping stock-bond correlation positive and long-duration risk elevated heading into Warsh's first meeting.
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FOMC Hawkish Shift Priced; Focus on Warsh's First Meeting
Markets are pricing a definitive hawkish pivot at next week's FOMC meeting — removal of the easing bias, higher inflation forecasts, and median dots pushing rate cuts into 2027 — with new Chair Kevin Warsh's communication style the wildcard; the cross-asset implication is rising long-end yields and a firmer USD, challenging risk parity's stock-bond negative correlation.