Federal Reserve Chairman Kevin Warsh, appointed by President Donald Trump and only months into his tenure, is facing mounting questions about his credibility following the central bank's latest decision to hold interest rates steady.

The Federal Open Market Committee voted 9–3 to keep the policy rate unchanged, an unusually wide margin of dissent for a panel that typically strives for consensus. In the aftermath, Bank of America circulated a note arguing that Warsh appeared overly complacent on inflation, unnerving investors who now anticipate greater inflation risk and prolonged uncertainty.

"Fed Chair Warsh's press conference on the back of a 9-3 decision to hold the policy rate unchanged came across as dovish, and didn't bring any good or bad news, and it just added uncertainty," the Bank of America message stated. "The market immediately priced it with a bear steepening, high inflation breakevens, and higher risk premia. A steeper curve, lower equities and a weaker dollar is the typical price action associated with credibility shocks faced by EM central banks."

The comparison to emerging-market central banks is notable: credibility shocks at major monetary authorities are comparatively rare, and when investors begin doubting a Fed chair's inflation resolve, longer-dated Treasury yields tend to rise as holders demand greater compensation for inflation and policy uncertainty.

Bloomberg's Joe Weisenthal flagged the bank's assessment on social media: https://x.com/TheStalwart/status/2084243057407320520

Employ America executive director Skanda Amarnath noted that Warsh had signaled potential rate hikes for July before ultimately stepping back. "And now the committee will compensate with more hikes in 2026. Three hikes is the right base case for the rest of the year," Amarnath said.

Warsh's credibility was also called into question by Tim Duy, chief U.S. economist at SGH Macro Advisors.

University of Michigan economics and public policy professor Justin Wolfers addressed the issue on his podcast, arguing that Warsh's strategy of offering less guidance backfired. "Markets don't just listen to the Fed's actions. They listen to what the Fed says it believes. When that message gets unclear, uncertainty fills the gap," Wolfers said. He added: "Less clarity created more uncertainty." https://x.com/JustinWolfers/status/2084077737552064742 https://x.com/JustinWolfers/status/2084062733050232900

Separately, Weisenthal highlighted commentary from the Institute for Supply Management's latest manufacturing report, in which two respondents described the current environment as worse than the COVID-19 pandemic. https://x.com/TheStalwart/status/2084242420833595482 https://x.com/TheStalwart/status/2084279259560820808

"No normalcy in sight in the world of metals," stated a respondent in the Primary Metals sector. "It makes me yearn for the coronavirus pandemic chaos, which was more manageable than whatever this is that we are in. At least business is better; however, the components of good business are not. Sharp pricing downturns in aluminum will make things more interesting, as supply levels will prevent those decreases from taking hold across the board. Getting customers to understand that is not always easy."

A representative from Electrical Equipment, Appliances and Components echoed that assessment: "The pricing volatility and lead-time extensions in this market are arguably worse than the pandemic era. During COVID-19, we saw a surge of price hikes and inventory buy-ups, which caused constraints that eventually leveled out. We are seeing nothing but consistent upward trends for both pricing and lead times that show no signs of slowing down." https://x.com/IrvingSwisher/status/2084246644053184810