On July 1, Federal Reserve Chairman Kevin Warsh will attend a policy panel discussion at the European Central Bank's "Global Central Bank Forum" at 21:30 Beijing time on Wednesday, where he will speak alongside ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, and Bank of Canada Governor Tiff Macklem. This will mark Warsh's first public appearance since he chaired the FOMC meeting last month, and the market is looking for policy direction clues from his remarks. Analysts are particularly interested in whether Warsh will signal his views on inflation assessments, communication strategies, and the continuation of a hawkish stance. However, if the market hopes for clear guidance on interest rate paths, it may be disappointed. Warsh has previously expressed reservations about forward guidance tools, suggesting they offer limited help in policy execution and leaning towards reduced communication. IMF Chief Economist Pierre-Olivier Gourinchas noted that strong forward guidance could lock central banks into future actions, limiting policy flexibility. Evercore ISI's head of central bank strategy and economics, Krishna Guha, indicated that the market will focus on how Warsh dissects inflation components, including falling oil prices, changes in inflation expectations, commodity trends, dollar appreciation, and cost spillover effects from AI. Currently, the core PCE price index in the U.S. rose to 3.4% in May, the highest since October 2023, and investors expect Warsh may reaffirm the Fed's commitment to achieving price stability. Warsh's hawkish comments at the Fed's press conference have already impacted the bond market, with the 2-year Treasury yield rising and the 10-year yield falling from about 4.5% to around 4.3%. The market currently prices in an approximately 80% probability of a rate hike in September. Guha stated that if Warsh believes it is necessary to establish policy credibility through rate hikes, taking action in both July and September could help complete adjustments before the midterm elections; however, it is more likely that Warsh is still assessing whether it is necessary to reinforce credibility through rate hikes, suggesting that the July meeting may not result in immediate action.

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Warsh to Make First Appearance at Global Central Bank Forum Today, Market Focus on Inflation and Rate Signals

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