'Could Happen': Trump Okay With Potential Rate Hike Under Warsh, Reversing Powell-Era Cuts Push

In one of the most politically striking developments in recent Federal Reserve history, President Donald Trump has signaled he would accept a potential interest rate hike under new Fed Chair Kevin Warsh — a dramatic and almost complete reversal of the position he held throughout the tenure of Jerome Powell, whom Trump repeatedly and publicly attacked for failing to cut rates deeply or quickly enough. The development came on the same day that Warsh presided over his first Federal Open Market Committee (FOMC) meeting on June 17, 2026 — holding rates steady at approximately 3.6% — but delivering a hawkish shock to financial markets as nine of his 18 FOMC colleagues signaled support for rate hikes this year, with stocks selling off sharply and traders pricing in a better than 90% chance of a rate hike by October.

The Historic First Meeting: What Happened on June 17, 2026

Kevin Warsh's inaugural FOMC meeting delivered a series of surprises that rattled markets and reset the entire narrative around the Fed's 2026 policy path:

• Rates Held at ~3.6% — Unanimously: Warsh oversaw a unanimous vote to hold the federal funds rate unchanged — a rare show of committee unity on the decision itself. Even former chair Jerome Powell, who remained on the Fed's governing board as a rank-and-file governor, voted in favor of holding rates at approximately 3.6%.
• Nine Officials Back Rate Hikes — A Seismic Shift: The committee's quarterly projections told a dramatically different story. Nine of Warsh's 18 FOMC colleagues signaled they supported higher rates this year — with six of those supporting two quarter-point increases. This is a sharp change from March, when no policymakers penciled in a hike and the committee as a whole forecast one cut in 2026. The overall projection now shows the committee expects 0.25% of rate hikes in 2026, followed by the same amount of cuts in 2027.
• Warsh's Own Dot Plot Absence — "For Me It's Not Helpful": In a significant break from Fed tradition, Warsh was the only committee member who did not submit an economic projection. "I did not submit a dot," Warsh said. "For me it's not helpful." Warsh had previously criticized the projections for potentially locking the Fed into a specific policy outlook — and his absence from the dot plot is read by analysts as a signal he may seek to eliminate the quarterly projections entirely in future meetings.
• The Shortest Fed Statement in Modern History: The FOMC statement under Warsh was just 130 words — a massive cut from the 341 words in the final Powell-led Fed meeting in April and a deliberate signal of Warsh's intention to strip Fed communications back to their essential purpose. The statement dropped language that had previously suggested the Fed's next move would be a rate cut — and said simply that "the committee will deliver price stability."
• Five Task Forces Launched: Warsh announced the creation of five task forces to begin work in the next "couple of weeks" — reviewing the Fed's communications, inflation assessment, data sources, balance sheet strategy, and productivity framework. When asked whether the Fed's 2% inflation target itself was on the table, Warsh said he did not believe in revisiting that target until it had been reached.

For the complete official transcript and video of Warsh's first press conference as Federal Reserve Chair — including his full statement on inflation, rates, and the Fed's new communications approach — PBS NewsHour broadcast the full press conference live and has the complete video and transcript available for reference.

Trump's Stunning Reversal: From "Cut Rates!" to "Could Happen"

Perhaps the most politically remarkable dimension of today's FOMC outcome is President Trump's apparent acceptance — at least tacitly — of the possibility that his own Fed Chair might need to raise interest rates. To fully appreciate the magnitude of this shift, context is essential:

• The Powell Years — A Relentless Push for Cuts: Throughout Jerome Powell's tenure as Fed Chair, Trump maintained a relentless and often aggressive public campaign for lower interest rates — calling Powell "clueless," demanding he cut rates to zero and below, and repeatedly suggesting he wanted to fire or demote the Fed Chair for failing to deliver the monetary easing Trump wanted. This pressure intensified after Trump returned to the White House in 2025 — with Trump repeatedly attacking Powell for not reducing rates deeply enough, pressure that ironically backfired by prompting Powell to stay on the Fed's governing board after his chairmanship ended.
• Why Warsh Was Chosen — The Original Rate Cut Expectation: Warsh had supported rate cuts last year while under consideration to be Trump's pick as Fed Chair — pointing to AI's productivity-enhancing potential as a disinflationary force that would justify lower rates over time. Trump nominated him on January 30, 2026, with widespread market expectation that a Warsh Fed would be more sympathetic to rate cuts than the Powell-era committee.
• The Inflation Reality Changes Everything: Since the Iran war began on February 28, 2026, inflation has surged to a three-year high of 4.2% CPI in May 2026 — driven primarily by energy price spikes from Middle East supply disruption. This inflation reality has forced both Warsh and, apparently, Trump himself to confront the fact that rate cuts are no longer the appropriate policy response to current economic conditions.
• Trump's "Could Happen" Signal: In a marked departure from his years of demanding lower rates, Trump has signaled he would accept the possibility of a rate hike under Warsh if inflation requires it — a position reflected in the phrase "could happen" that captures his unusually measured response to the hawkish signals from Warsh's first FOMC meeting. This represents a fundamental reversal of the posture he maintained throughout the Powell era — and suggests that Trump recognizes the political danger of being seen as the president who let inflation run hot into the 2026 midterm elections.

Why This Is Such a Dramatic Political Shift

The significance of Trump's apparent acceptance of a potential Warsh rate hike cannot be overstated in the context of his political history with the Federal Reserve:

• The Political Calculation Has Inverted: During the Powell years, Trump's demand for rate cuts was politically motivated — he wanted cheaper borrowing to juice economic growth and equity markets. Now, with inflation at 4.2% and midterm elections approaching, the political calculus has inverted completely: a rate hike that successfully brings inflation down serves Trump's political interests better than rate cuts that risk letting inflation continue to erode American household purchasing power. As Warsh himself acknowledged, "persistently high prices are a burden for the American people."
• The Iran Peace Deal Wildcard: Trump has announced an initial peace agreement with Iran that could bring the three-month conflict to an end — potentially reducing oil prices and cooling energy-driven inflation in the coming months. If peace holds and gas prices fall, the case for a rate hike weakens considerably — giving Warsh the opportunity to avoid the politically uncomfortable move of raising rates while still delivering on inflation control. But even with peace, core inflation — which excludes food and energy — rose to 2.9% in May, and Fed officials expect it to remain elevated at 2.5% through next year.
• Warsh's Hawkish Press Conference Tone: Despite not submitting his own rate projections, "economists saw his message at the press conference as hawkish," according to PBS NewsHour reporting. Matthew Luzzetti, chief US economist at Deutsche Bank, said: "The risk that they might need to raise rates has clearly risen given what we got today." Financial markets agreed — stocks fell sharply after Warsh spoke, with the S&P 500 closing down 1.2%, the Nasdaq falling 1.3%, and the Dow sliding 506 points.

The Powell Factor: An Unprecedented Complication Warsh Must Navigate

Adding a layer of institutional complexity that has no modern parallel, Jerome Powell — whose term as Fed governor does not expire until 2028 — voted at Wednesday's meeting in favor of holding rates unchanged. The spectacle of a former chair voting at his successor's inaugural meeting — while the sitting president transitions from attacking that former chair for not cutting rates to accepting rate hikes under the new one — is genuinely without precedent in Federal Reserve history and underscores the extraordinary institutional moment the US central bank finds itself navigating.

What Today's Market Reaction Tells Us

The market's response to Warsh's first FOMC meeting was swift and unambiguous:

• Stocks Sold Off Sharply: After Warsh's press conference, the S&P 500 fell 1.2%, the Nasdaq Composite dropped 1.3%, and the Dow Jones Industrial Average slid 506 points — as equity investors priced in the higher-for-longer rate environment implied by nine FOMC members supporting hikes.
• Bond Yields Rose: US Treasury yields moved higher across the curve — with long-term yields rising as traders repriced the probability of rate hikes replacing the rate cuts that markets had previously expected for the second half of 2026.
• 90%+ Hike Probability by October: After Warsh's press conference, traders priced in a better than 90% chance of a rate hike by October 2026 — a dramatic reversal from the near-zero hike probability that prevailed heading into Wednesday's meeting.

What Warsh's "Regime Change" Really Means for the Fed's Future

Before becoming chairman, Warsh had suggested the Fed needed "regime change." Wednesday's meeting provided the first concrete evidence of what that means in practice:

• Dramatically Shorter Communications: The 130-word FOMC statement signals a Warsh-era Fed that communicates less — and more simply — than its predecessor, removing the elaborate forward guidance frameworks that Warsh has long criticized for constraining the committee's flexibility.
• No Dot Plot Submission from the Chair: Warsh's decision not to submit his own projections signals potential elimination of the quarterly dot plot — one of the most market-moving Fed communications tools — in future meetings.
• Task Forces Signal Structural Review: Five task forces reviewing inflation assessment, data sources, communications, balance sheet, and productivity suggest a Warsh-led Fed is prepared to fundamentally rethink how the central bank operates — not just how it sets rates.

The Bottom Line

Today's FOMC meeting under Kevin Warsh has delivered one of the most consequential monetary policy signals of 2026 — and arguably one of the most surprising political developments of the Trump presidency. The same president who spent years demanding rate cuts and attacking Jerome Powell for delivering them too slowly has now signaled he accepts the possibility that his own handpicked Fed Chair may need to raise rates to fight inflation. That "could happen" — two words that represent a complete 180-degree turn from years of White House monetary policy pressure — may prove to be among the most consequential phrases of the Warsh era before it has even fully begun.

For American borrowers, homeowners, investors, and businesses, the message from Wednesday's FOMC meeting is unmistakable: the era of rate cut expectations is over — and the next move in US monetary policy may well be up, not down.