Kevin Warsh opened his day as Federal Reserve chair by pledging inflation control amid President Donald Trump’s Iran conflict. In a press conference, he warned that “persistently high prices” remain a burden and signaled the Fed could raise rates despite keeping policy steady for a fourth meeting. His stance marks a shift from the administration’s agenda. He also warned about supply‑chain pressures.

Wall Street reacted instantly, with short‑term Treasuries sold off as investors priced in a potential rate hike. The two‑year yield jumped 0.17 percentage points, landing at 4.22%, its highest level in 16 months. The move suggests traders now expect a rate increase by October, tightening liquidity for corporate borrowers. The sell‑off also pushed dollar‑linked emerging market bonds lower, significantly tightening financing conditions abroad.

Warsh also promised a “new chapter” for the Fed, hinting at structural reforms to improve policy transmission. By tying inflation targets to concrete actions, he aims to restore credibility eroded by previous rate pauses. Investors will now watch upcoming data for signs that the central bank will indeed shift from accommodation to significantly tightening.