Kevin Warsh Wanted a ‘Family Feud’ at the Fed; At Wednesday’s Meeting He Might Get One

Federal Reserve Chairman Kevin Warsh keeps predicting a Fed “family fight.” Wednesday’s policy meeting could finally deliver a real one, with economists expecting at least two hawkish dissents over interest rates.

Warsh has used the phrase 13 times since his April nomination hearing, according to a CNBC tally. His first meeting as chair ended in a unanimous hold last month.

A Feud That’s Been Building for Months

Wall Street expects a different outcome this week. JPMorgan’s Michael Feroli predicts a contested vote. He names Cleveland Fed President Beth Hammack and Dallas Fed President Lorie Logan as likely dissenters.

“The July FOMC will be a family feud… just as Kevin Warsh intended.”
Oscar Munoz, TD Securities

TD Securities’ Oscar Munoz agrees. Traders are already repricing the odds. CME Group’s FedWatch tool now shows 34.2% odds of a quarter-point hike, up from 12.8% just a week ago.

While there is a higher chance of rates staying where they are, the chance of them rising is also increasing. Image Source: FedWatch

Oil and Chips Are Feeding the Feud

A collapsed U.S.-Iran ceasefire has pushed oil prices higher again. Brent crude climbed back above $100 a barrel, undoing the recent oil price relief. But a recent pause in hostilities has brought that price back down for the moment.

Chip shortages tied to the AI boom have raised consumer electronics prices too. Hyperscalers keep spending heavily on AI infrastructure, and that shows no sign of slowing. Fed Governor Chris Waller argues the central bank cannot just watch inflation and hope it fades, echoing Warsh’s own recent complaint about the Fed’s inflation framework mistake.

Cleveland Fed President Beth Hammack has been especially blunt about the stakes. She says businesses and consumers are both losing patience with prices.

“For the first time in my tenure, I’m hearing from businesses who say they think we need to take action to curb inflation, and from consumers who can’t make ends meet about a growing sense of despair.”
Beth Hammack, Cleveland Fed President

A softer June inflation report still favors a hold on Wednesday. The Fed’s next test also lands just as U.S. midterm elections near, adding political weight to the vote. But two hawkish dissents would turn Warsh’s family fight into the real feud he predicted all along.

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