Fidelity Alert: Wosh Faces the Fed Chair’s First Big Test—Bond Market Volatility Could Be Sparked

BlockBeats News, June 17 — On the eve of the Federal Reserve's upcoming interest rate decision, multiple analysts from Fidelity Investments stated that the first major appearance of new Fed Chair Kevin Warsh after the announcement could be a key factor triggering market volatility, especially in the bond market. Fidelity fixed income investment manager Julian Potenza said that after investors digest the policy statement and economic forecast summary, Warsh's communication style will directly influence market reactions. He stated: "Currently, almost no one expects the Fed to take concrete action, but since the market is still unclear on how Warsh will express his views, there is room for volatility. It is not uncommon for the market to 'test' the new chair after his appointment."

The market generally expects the Fed to maintain the policy rate in the 3.5% to 3.75% range, while shifting the language in the statement toward a more neutral stance, ending the prolonged easing bias since the rate cut cycle began in 2024. Some officials, citing persistent high inflation, may signal a more hawkish stance through quarterly "dot plots," implying the possibility of rate hikes in 2026 or even 2027. The U.S. Treasury market, with a scale of $31 trillion, has recently experienced continued volatility. Against the backdrop of rising oil prices due to the Iran conflict, the 10-year U.S. Treasury yield has risen from below 4% before the conflict to over 4.4%. The pricing in the interest rate swap market has also shifted; previous expectations of rate cuts have been revised, with about an 80% probability now betting on a 25 basis point rate hike within the year.

Fidelity fixed income manager David DeBiase said that the core disagreement in the current market lies in Warsh's policy stance. He stated: "What everyone is discussing is whether we will see the hawkish Warsh from 10 years ago, or the more moderate version today." DeBiase also emphasized that how Warsh articulates his understanding of inflation is crucial. He mentioned that during the nomination confirmation process, Warsh discussed "tail inflation" and the inflation-mitigating effects brought by AI, and the market wants to further understand the basis for these views and how his judgments are formed. (Jin10)