Analysis: Kevin Warsh is keeping Wall Street guessing. It may be his most powerful tool.

Key points

• Fed Chairman Kevin Warsh kept markets guessing at Wednesday's press conference, declining to confirm a set policy course.
• Warsh signaled a lean toward higher rates, saying he is unwilling to call financial conditions tight.
• The Fed will skip rate votes at one meeting in 2027 and two in 2028, while still meeting eight times a year.

Federal Reserve Chairman Kevin Warsh used his press conference Wednesday to keep markets uncertain about the central bank's next move, a shift from his early appearances when he often seemed backed into a corner. He signaled a lean toward higher rates without committing to a set path, saying that if the Fed had a firm conclusion it would announce it with much fanfare.

Warsh, appointed by a president who said cutting rates was a litmus test for the job, faced questions about his credibility after the FOMC held rates flat in June and July despite inflation well above the 2% target. September's rate hike, accompanied by a hawkish reading of the economy, swung markets sharply, and investors expected another hike this week until top officials appeared to temper expectations.

What Warsh said

Warsh gave a strong signal that his current lean is toward higher rates, saying that while overall financial conditions are tighter, he is unwilling and unable to call them tight. He declined to confirm market assumptions that officials who talked down expectations had done so at his direction, saying that to suggest he is an all-knowing person sending messages is not the FOMC he knows.

He also pushed back on any suggestion the Fed tolerates inflation above target, saying the target is 2% flat. His remarks set up the possibility of a December hike if inflation remains stubborn, with a raft of new data due before that meeting.

If we had a firm conclusion about the conduct of monetary policy, we'd announce it to much fanfare today

— Kevin Warsh

Changes at the Fed

Warsh announced a plan Wednesday to reduce the number of scheduled FOMC votes on interest rates over the next two years. The Fed will keep meeting eight times a year but skip a vote at one meeting in 2027 and two in 2028, which devalues much of the Fed's public communication. Regional presidents also get one fewer scheduled vote in their year-long rotations.

Robert Sockin, chief U.S. economist at PGIM, said Warsh did not sufficiently explain why the backdrop did not justify a rate increase this week. He called the hold a policy mistake and said a gradual Fed likely means one that has to hike higher, mechanically raising recession risk.