Warsh Strikes Hawkish Tone After Delivering Rate Hike: ‘Readings Do Not Tell Me Underlying Trends Have Meaningfully Improved’

Federal Reserve chairman Kevin Warsh struck a hawkish tone on Wednesday after the central bank delivered a widely expected interest rate hike, saying inflation has been "too high" for "too long."

Speaking to press after the decision, Warsh said that the Federal Open Market Commitee's "predominant focus is on the price stability side of our mandate." "The plain fact is that inflation is too high, and has been for too long," he added.

Warsh went on to say that "this summer's inflation readings do not tell me that underlying trends have meaningfully improved," as several categories within the recent inflation readings are still above 3% on a six-and 12-month basis.

Core inflation rose more than expected last month, rising 0.3%. The figure was 0.1 percentage points more elevated than forecasts. The annual rate clocked in at 2.4%, as the Dow Jones consensus expected.

The FOMC said in its statement that "inflation remains elevated" and the decision "will support a timelier return to the Committee's 2 percent goal." Most officials also projected another rate hike by the end of the year.

Elsewhere, the document noted that "economic activity is expanding at a solid pace" and, "while uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient."

"Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little," the FOMC added.

A survey conducted before the decision shows that market participants expect the central bank to take a more hawkish stance than before as price pressures continue, particularly in the energy industry.

The poll, conducted by CNBC, shows that 86% of respondents now expect one hike in 2027 and 55% more than one. That compares to 46% who expected a hike ahead in the last poll.

Respondents to the poll include economists, fund managers and strategists. Most of them also said the Strait of Hormuz will remain closed for at least another month, putting further pressure on energy prices.

About three quarters of respondents expect the impact to translate to broader prices. However, the growth outlook has remained largely unchanged at 2.25% this year and in 2027. Recession concerns stayed at 29% over the next 12 months.

As for the stock market, respondents expect the S&P 500 will remain at current levels this year and climb about 8% in 2027, clocking in at 8.274.