US Rates Warsh and peace

Research evidence excerpt

US Rates Warsh and peace

Fixed Income ● Rates

24 June 2026

Back to “normal”? Not so soon

First, inflationary pressures may prove to be enduring, even if the tail risks of further energy-

driven accelerations have been mitigated. As noted by HSBC Economics (see Global

Economics Quarterly, 22 June 2026), it may take time for Gulf oil production and shipments in

the Strait to revive, while depleted inventories will still need to be rebuilt, both in the US and

globally. And despite the recent decline in crude oil prices, various derivative products remain

meaningfully above their pre-conflict levels.

Moreover, the surge in AI-related capex appears to also be contributing to inflationary pressures

alongside the boost to growth, with the sheer scale of construction in the near-term potentially

outweighing supply-side impacts on productivity in the short-run.

Second, a key takeaway from the FOMC meeting was a clear emphasis on the Fed’s inflation

responsibility. The June policy statement adopted more decisive language versus previous

iterations, stating that “the Committee will deliver price stability”. While Chair Warsh declined to

provide indications of subsequent policy rate changes, we think the combination of a firm stance

on inflation coupled with half of the FOMC projecting rate hikes keeps forthcoming Fed

meetings “live” for the possibility of rate hikes.

That, in turn, should keep pressure on front-end rates – especially if incoming data were to

continue showing signs of sticky inflation and relatively robust growth and employment.

Members of the FOMC are unambiguous and unanimous:

This Committee will deliver price stability.  Federal Reserve Chair Kevin Warsh, 17 June 2026

Third, we have argued for some time that if the Fed were to ultimately commence rate hikes,