Live coverage of the FOMC meeting

He said pandemic, dollar, predecessor, north star, shock, restrictive, balance sheet, productivity, uncertainty, progress, and inflation more than twenty times.

He never said oil, which had been trading at 75.5%, Iran, dissent, independence, Trump, president, and he never said groupthink, which had been trading at 57% an hour earlier.

Asked by Brian Cheung of NBC what the news was on a day with no rate change and no guidance, Warsh answers: "So apparently it was news that I had a press conference."

He commits to holding them through year-end, then closes by saying. "No doubt in some of your commentaries today, you'll talk about a divided Federal Reserve. Boy, that's not the feeling I felt."

Polymarket's September hike opened the hour at 60.5% and fell to 51.5%. No change in September rose from 37.5% to 46%. "Fed rate hike in 2026" fell from 76.5% before the decision to 62.5%.

Warsh: "We're not going to be constrained by market prices." Then the metaphor: if the Fed fogs up a useful source of information with its own forecasts and rolling commentary, "we're going to have less information, less ability to land the plane successfully."

Warsh does not address the spending. He says he picked 15 subject matter experts, that the FOMC is the decision maker and merely the consumer of the output, and that the judgments "will be informed by but not at all determined by these outside groups."

He adds, with what reads like awareness of the problem: "full disclosure, I've known almost all of them for a very long time."

"So believe it or not, this press conference is not all I've done today."

He says the discussion was the farthest thing from inertia he can imagine, that the Fed is "in the performance business," and then the caveat he repeats twice in ten minutes: "We've got no magic wand."

"Surprise is not the objective function."

When asked whether refusing to give a reaction function cedes control of the narrative, he says he is not very concerned.

"Any central banker when he or she sees underlying inflation moving higher, he or she is more inclined to tighten policy. When you've achieved the other side of your mandate, and you see underlying inflation falling, he's more inclined to loosen policy. That's my reaction function."

Employment is at equilibrium on his own account. Inflation is elevated on his own account.

He may use it to frame the big questions instead, complaining that the proliferation of meetings and press conferences makes everyone "get caught up in the myopic. Did you do this by a quarter or do that?"

But he lets one thing slip while describing what the speech might otherwise have been. A traditional setup, he says, "for all the action we're going to have between September and December."

Warsh rejects the word outright. He calls it a rigorous review, a review of the big hard questions, and "a view of what our own homework is to try to resolve those questions in the period ahead."

Then: "Did the Fed take an explicit change in its policy rate today? No. But I think that's the beginning of the story, not the end of the story."

Warsh: "Rates are higher today than they were 42 days ago." Markets moved because the Fed stepped back from influencing them. "That doesn't mean we take them as by dictation, but we're observing them." He says market information "can help inform our decision-making when we meet in seven or eight weeks."

"Not much. Not much."

He says the historic problem with data dependence "is the data and the dependence," and that he cares about trends rather than any single print. He also notes he said 63 months of above-target inflation at the last meeting and did not say 64 this time, "though the final calculation might be a close one."

"So I guess I shouldn't give you their best arguments. I'll give you some others."

Then: "I asked for a good family fight, and I got one. That's the purpose. That's the design feature."

He says there was a large majority for the decision, that nothing about the discussion was inertial, and that "the path to central bank heaven requires delivering on our remit."

Asked separately whether the hold was conviction or a hair trigger.

"This is a period of watchful thinking, not watchful waiting. And I think the score on that vote was unanimous."

Whether five years of high inflation have changed the current policy problem, or, as he put it, "has the past really passed."

Whether shocks with different sources have different effects. He names strained supply chains from the pandemic, military conflicts, energy supply disruptions, tariff increases, and the surge in AI investment.

Whether price rises from those shocks signal broader inflation, or whether the committee is only looking at them "because they are under the bright streetlight."

And how much accommodation the balance sheet is still providing.

"Market participants are learning to play the ball, not the referee. And market prices will continue to respond in the direction and magnitude they see fit. This is, in my view, a change for the better. And we're just getting started."

Then, in the same breath: "the central bank need not always and everywhere be the center of attention."

He is claiming the eight-point swing in our market this week as evidence his experiment is working.

He also says: "For some households, businesses, and market professionals, five years of high inflation have left a mistaken impression that's hard to shake, that the Fed's implicit inflation target was somehow above 2%. Let me reiterate. There is no soft inflation target. There is no soft implicit target, not on this committee's watch. There's only a target, and it's 2%."

He adds that five plus years of above-target inflation "cannot be cured in nine weeks or by a single month of modest price decreases."

June was unanimous.

This is the most dissents in the hawkish direction since September 2016.

The hike went to zero.

Additionally, it says inflation remains elevated relative to the Committee’s 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy.

No forward guidance.

The Committee is also continuing its policy of maintaining ample reserves in the banking system.

CME FedWatch sat near 38% at yesterday's close, while Polymarket has it at 20.6%, which is a whopping 17-point difference.

Jim Bianco said today that 38% pricing means Citadel's call is "not that far" from where professionals already are.

On the other side, Bill Adams at Fifth Third expects a fifth consecutive pause, Gregory Daco at EY-Parthenon calls a July hike "highly unlikely" while conceding it is "a 60 to 40 call," and economists polled by FactSet say no change.

"The market may once again be underestimating the extent of the hawkish shift at the Fed," Flight said. He argued the move would back Warsh's pledge on price stability, and would "emphatically end the forward guidance era."

He put swaps at roughly 40%. Polymarket has the same hike at 27.

Interest rate swaps have been repricing toward 40% through the morning.

Bloomberg's line on it today: bond traders are on edge as the risk of a hike this week mounts.

That is a long way from where the professionals sit. CME FedWatch had a July hike at 10.7% on July 15 and 34.7% by July 22, more than tripling in a week.

Three Fed officials opened that door.

Christopher Waller on July 13 said he was concerned that if the upward trend in core inflation continues, "it will be hard to push inflation back."

Kevin Warsh on July 15 said the committee has "no tolerance for persistently elevated inflation."

Philip Jefferson on July 16 said, "it could be appropriate to reconsider our current policy stance."