Jerome Powell's term as Fed Chair ends May 15, and Kevin Warsh takes the gavel a month before the June 16-17 FOMC meeting. The transition isn't the story—the repricing is. Friday's payroll print—172,000 jobs added in May against an 85,000 consensus, unemployment flat at 4.3%—pushed December hike odds from around 50% to nearly 70%, and the dollar rallied more than 1% last week to sit just under 100 this morning.
The labor market refused to crack. April CPI came in at 3.8% year-over-year, the highest since 2023, driven by a 17.9% energy-cost surge from the Iran war nobody knows how to end. That combination—sticky inflation, a job market that won't cooperate with the easing narrative, and oil still north of $90—killed what remained of the rate-cut fantasy and opened the door to something nobody wanted to price six weeks ago: a hike.
At the April meeting, a majority of FOMC participants noted that policy firming would likely become appropriate if inflation continued running persistently above 2%—language that sounded like table-setting at the time. It doesn't anymore. That April meeting saw four dissents, the most divided the Committee has been since 1992, and the split wasn't about caution versus patience; it was about whether holding at 3.50%-3.75% was still defensible or already behind the curve.
Warsh steps into that. He hasn't chaired a meeting yet, hasn't delivered a press conference, and the market's already pricing him as the hawk Powell couldn't be. That might prove right—incoming chairs with something to prove often lean harder than their predecessors—but it's also entirely speculative. The actual policy stance hasn't changed; the front-month fed funds curve has.
Here's what matters in the next nine days before the decision:
- May CPI, June 10: the last major data point before the blackout. Another hot print and hike chatter moves from the fringe to the dot plot.
- Warsh's first presser, June 17: how he frames the SEP, whether he pushes back on hike speculation, and what he says about energy-driven inflation versus core. The tone sets policy for the rest of the year.
- Iran ceasefire talks: clashes in Lebanon continue, Iran demands a Lebanon ceasefire before accepting any US deal to reopen Hormuz, and Trump's "final stages" claim conflicts with Iran's "no tangible progress" line—meaning oil stays bid and the inflation shock stays live.
- The dollar at 100: DXY near 99 at month-end, and a sustained break above 100 tightens financial conditions without the Fed lifting a finger—which could be the out that lets Warsh hold in June and keep optionality for July.
Futures and prediction markets assign over 95% probability of no change at the June meeting, but that's the near-term call. The real shift is December: the market went from pricing one cut this year to pricing a coin-flip on a hike, and it did it in a week. Analysts expect the Fed to remain on hold for 2026 as unemployment stays stable and inflation remains elevated, but "on hold" in this context means 3.50%-3.75%—not the 3.00%-3.25% the curve was pricing in March.
The April SEP showed a median forecast for one rate cut in 2026, unchanged from December, but that was Powell's Committee under Powell's forward guidance. Warsh inherits the data but not the bias, and the market's betting he reprices both. Whether he does—or whether he uses the June presser to walk back the hike speculation and reclaim some dovish credibility—is the only question that matters for everything priced in dollars between now and September.
The thirty-year's already back above 5%. The dollar's knocking on the door. And the new Chair hasn't said a word yet.