President Donald Trump says raising interest rates “just keeps a country down.” But Kevin Warsh, the Fed chair he picked to deliver cuts, yesterday teed up the opposite.

The Federal Reserve held its benchmark rate at 3.5% to 3.75% on Wednesday at Warsh’s first meeting as chairman.

The vote was unanimous, but the projections flipped hawkish. Nine of 18 policymakers now expect a hike before year-end, six of them two, lifting the median year-end rate to 3.8% from 3.4% in March.

The missing dot was Warsh’s own. He declined to submit a forecast, calling it “not helpful,” part of a push to wean markets off the dot plot.

Trump, traveling in France, brushed off the hold with a shrug. “It’s all right,” he told reporters. A hike, he added, would be “hard to believe” and “just keeps a country down.”

Prediction Markets Are Pricing The Hike Trump Doesn’t Want

The odds of at least one hike by year-end on Polymarket climbed to roughly 53%, up from around 30% two days earlier.

Polymarket traders think there is only a 20% chance of a rate cut this year.

Warsh left little doubt about where his head is at. “I’ve said for years inflation is a choice,” he told reporters. Prices have run above target for five years, he added, “and we’re going to fix that.”

The Supply Shock

May CPI hit 4.2%, a three-year high, but core inflation ran cooler near 2.9%, pointing to Iran-driven energy costs rather than an overheating economy.

Traders give a 39% chance of traffic in the Strait of Hormuz returning to normal by the end of July, a crucial step to combating inflation.

The labor market ran hotter than expected, with 172,000 jobs added in May, nearly double forecasts, and unemployment holding at 4.3%, giving hawks cover to argue the economy can absorb higher rates.

SPDR Gold Shares (NYSE:GLD) dropped more than 2% while the dollar logged its best day in nearly a year. A Polymarket market on 2026 inflation gives a 21% chance prices top 4.5% at some point this year.

Warsh also unveiled five task forces to overhaul the Fed, one studying how AI and productivity shape inflation. He has long argued that AI could expand output enough to pull prices lower on its own, the structural case behind his bet that today’s inflation will fade.

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