On July 29, 2026, Federal Reserve Chairman Warsh held a press conference at the Federal Reserve headquarters. This press conference followed the Federal Open Market Committee policy meeting, where policymakers decided to maintain the benchmark interest rate unchanged. For the Fed Chairman, who considers credibility his primary cornerstone, Wednesday's market reaction to Warsh's speech must have been particularly challenging. On Wednesday afternoon, the Federal Open Market Committee (FOMC) meeting concluded, followed by a press conference hosted by Warsh. The vote was 9-3, with the Fed choosing to maintain interest rates. This was Warsh's second policy meeting since taking the helm of the Fed on May 22. Market investors reacted significantly: drastically lowering the probability of a rate hike at the next Fed meeting, while simultaneously pushing up long-term US Treasury yields. After the press conference, the 30-year Treasury yield hit a new high since 2007, while the 2-year Treasury yield declined. According to CME FedWatch data, market bets on the probability of the Fed maintaining interest rates at its next meeting surged 20 percentage points to 45%. This market dynamic signals that investors believe that even if, as Warsh stated, inflation has been above the Fed's 2% target for at least 63 consecutive months, the Fed will not implement tightening policies in the short term; however, in the long run, with the economy continuing to heat up, the Fed may be forced to take more aggressive rate hike measures in the future. Before taking office, Warsh had fiercely criticized his predecessor, Powell. Previously, after the Federal Reserve lowered the federal funds rate, long-term Treasury yields rose. Warsh repeatedly pointed out at the time that the core issue was Powell's lack of policy credibility. Wednesday's situation was slightly different—the Fed did not cut rates this time, but simply maintained them at the current level. Warsh also suggested at the press conference that the recent rise in long-term interest rates might reflect positive signals from the economic front, such as stronger corporate investment. However, mainstream market participants did not agree with this interpretation. Senior Fed watcher Jon Hilsenrath pointed out in a research report to clients after the meeting that, faced with persistently high inflation, Warsh needed to clearly explain what circumstances would ultimately lead him to raise rates. "Warsh failed to deliver a clear and explicit policy signal, and the bond market voted with its feet," Hilsenrath wrote. When pressed for policy details—why he and the other eight members of the Federal Open Market Committee agreed that the current interest rate range of 3.5%–3.75% (which has been maintained for several months) was reasonable—Warsh did not provide a direct answer. Warsh has already pushed for a policy shift within the Fed, abandoning the forward guidance mechanism. Former Federal Reserve chairs have traditionally been accustomed to releasing clear signals about future interest rate trends in advance, but Warsh believes that forward guidance restricts the Fed's flexibility and interferes with market signal transmission. For this reason, he rarely explains his decision-making logic publicly. "I understand the market's desire for the Committee to continue releasing forecasts and policy comments. But for us, it's necessary to observe the market's reaction to various economic events directly and undisturbed," Warsh stated in his opening remarks at the press conference. After the press conference, many economists were confused. Eric Winograd, chief U.S. economist at AllianceBernstein, told clients, "I think today's press conference was disorganized and contained many contradictions." The June CPI showed a 0.4% month-on-month decline in prices, which should have been an opportunity for Warsh to use positive economic data to release signals. However, Warsh stated that this data had "limited reference value" for his decision-making, while acknowledging that inflation remained "high." The Fed has long anchored the PCE (Consumer Price Index) as an indicator of achieving its 2% annual inflation target. The latest PCE reading was 4.1%, and Warsh again did not offer a clear stance on this data. He also revealed that he has established five special working groups to assess internal reforms within the Federal Reserve; one of these groups may propose reducing the weight of the PCE as the central bank's official inflation target when it submits its report at the end of the year. Warsh stated, "For now, we will continue to use the PCE indicator. But no one can be certain what adjustments we will make to the policy framework after January." On the one hand, Warsh refused to explicitly define the triggers for interest rate hikes; on the other hand, he hinted that the Fed may not continue to use the PCE as the core inflation indicator. These two statements have prompted market participants to re-examine his still-short term as chairman. Michael Feroli, chief U.S. economist at JPMorgan Chase, said, "These two points have led the market to question whether the new chairman can deliver on his promise to suppress inflation." The Fed chairman cannot decide interest rate policy alone; he is only one of the twelve voting members of the FOMC. Three members voted against the decision to keep interest rates unchanged on Wednesday. If economic data does not improve rapidly in the coming months, the number of dissenting members may continue to increase. Michael Feroli wrote, "We believe this will force the rest of the committee to fulfill its policy mandate and take action. The Fed chair has never been in the minority in interest rate votes." This puts Warsh in a dilemma: having only been in office for a few months, his policy credibility is at risk of being eroded, both in the eyes of the market and within the Fed.