Fed begins Warsh era by keeping rates on hold, sees one hike later this year

The Federal Reserve, now under Chair Kevin Warsh, kept its benchmark rate unchanged at its first meeting under new leadership but penciled in one additional rate hike before year-end, suggesting a more hawkish posture than markets may have priced. Warsh, known for his hawkish leanings, framing this hold-with-hike-bias as a credibility signal — reinforcing the Fed's commitment to fighting inflation even as growth signals remain mixed.

The second-order setup is in rate-sensitive sectors: utilities, REITs, and long-duration tech could face valuation compression if the market re-prices the terminal rate higher. Watch the 2-year Treasury yield and the dollar index as near-term signal — a sustained move higher in both would confirm the hawkish re-pricing is underway and could pressure equity multiples heading into Q3.