Key Takeaways
- Kevin Warsh said prices are too high at Sintra on July 1, 2026.
- Kalshi traders put 77% odds on a Fed rate hike before 2028.
- Bitcoin climbed near $60,000 after Warsh flagged easing inflation risk.
Warsh spoke on a panel alongside European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey and Bank of Canada Governor Tiff Macklem at the ECB’s annual Forum on Central Banking. He said inflation expectations and risks have eased over his first four weeks as chair, but he stopped short of signaling what the Fed will do at its next meeting.
“We’ve all looked around and we’ve seen that prices are too high, and I don’t think I’m the only one on this stage that’s recommitted to deliver price stability,” Warsh remarked.
He added that anyone expecting the Fed to tolerate inflation above 2% “would be disappointed.”
Rate Hike Bets Build on Prediction Markets
Traders on Kalshi and Polymarket are pricing real odds of a Fed rate hike, a reversal from years of cut expectations.
On Kalshi, bettors assign a 77% chance of a hike before 2028, a 66% chance before July 2027 and a 53% chance before the end of 2027. The market has traded more than $3.1 million in volume.
Polymarket’s separate contract, which resolves if the Fed raises its target rate any time in 2026, shows 54% odds. That market has drawn more than $3.2 million in volume since launch.
Inflation Data Behind the Hawkish Tone
May 2026 consumer prices rose 4.2% year over year, the highest reading since April 2023. Core CPI climbed 2.9%. The Fed’s preferred gauge, core PCE, rose 3.4%.
Energy prices drove much of the spike after the U.S.-Iran conflict disrupted oil markets. A preliminary cease-fire and the reopening of the Strait of Hormuz have since pulled oil back toward pre-war levels, and 10-year inflation breakeven rates have eased to around 2.2%.
Warsh’s first FOMC meeting on June 17-18 held rates at 3.50% to 3.75%, shortened the policy statement and removed language favoring rate cuts. The vote was unanimous, and the updated dot plot showed several officials expecting a hike later this year.
Markets React
Treasury yields ticked higher, with the 10-year near 4.48%, as traders priced in a greater chance of a hike later in 2026. Gold rebounded. Bitcoin climbed toward $60,000, gaining roughly 2% to 3% on the day as traders read Warsh’s tone as less hawkish than his June debut.
Warsh also addressed President Trump’s public calls for lower rates, saying the Fed remains independent of political pressure. He declined to preview the outcome of the next FOMC meeting, expected around July 29.
The next major inflation reading arrives July 14 with June CPI data, which will shape whether the Fed holds steady or moves toward the hike traders are increasingly pricing in.
