Analysis: Fed Chairman Warsh's credibility in question after leaving interest rates unchanged
Warsh hosted a press conference Wednesday afternoon following a meeting of the Federal Open Market Committee, which voted 9-3 to leave interest rates...
Key points
- Warsh hosted a press conference Wednesday afternoon following a meeting of the Federal Open Market Committee, which voted 9-3 to leave interest rates unchanged.
- Investors responded by sharply lowering the chances that the Fed will raise interest rates at its next meeting but also raised the yields on long-term government debt.
- Before taking the job, Warsh sharply criticized his predecessor Jerome Powell when long-term Treasury interest rates moved up after the Fed cut the federal funds rate and said repeatedly that the underlying problem was Powell's lack of credibility.
- Warsh needed to articulate what it would take for him to want to eventually raise interest rates in the face of stubborn inflation, Jon Hilsenrath, a longtime Fed watcher, wrote in a note to clients after Warsh's press conference.
What happened
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Warsh hosted a press conference Wednesday afternoon following a meeting of the Federal Open Market Committee, which voted 9-3 to leave interest rates unchanged. Investors responded by sharply lowering the chances that the Fed will raise interest rates at its next meeting but also raised the yields on long-term government debt. Before taking the job, Warsh sharply criticized his predecessor Jerome Powell when long-term Treasury interest rates moved up after the Fed cut the federal funds rate and said repeatedly that the underlying problem was Powell's lack of credibility. Warsh needed to articulate what it would take for him to want to eventually raise interest rates in the face of stubborn inflation, Jon Hilsenrath, a longtime Fed watcher, wrote in a note to clients after Warsh's press conference. The Fed chairman doesn't set interest rates alone. A Fed chair has never been in the minority on a vote about interest rates.