Kevin Warsh's First TestBy Joel Litman, chief investment officer, Altimetry
 All eyes (and ears) are on the new Fed chair...
Kevin Warsh took office at the end of May. And earlier this month, the market listened closely as he led his first Federal Open Market Committee ("FOMC") meeting. FOMC meetings happen eight times per year. They give the market some hint of what's to come. These meetings are where the Federal Reserve discusses the state of the economy, announces any changes to interest rates, and gives guidance for future meetings. Warsh was appointed by President Donald Trump on the expectation that he'd work to cut interest rates. For this first meeting, folks were just expecting him to keep rates flat – which he did, maintaining the 3.5% to 3.75% target range. But that doesn't mean there were no surprises. The market soured – falling 1% – after Warsh's post-meeting speech was unexpectedly hawkish. He noted that inflation was quite high. And he asserted that the Fed ought to do something about it. Here's the thing... the Fed chair is something of a market diplomat. Warsh (much like his predecessor, Jerome Powell) can't always just speak his mind. He must carefully manage his words. He must acknowledge the reality of the economy without triggering a market panic. And that's exactly what he was trying to do... To better understand Warsh's comments, we need to look beyond his words...And that's where we turn to a longtime favorite tool of ours – the Earnings Call Forensics ("ECF") analysis. If you've been with Altimetry for a while, you're familiar with ECF. We've been refining this tool for more than 15 years. It's like a "lie detector" tool for company management (or in this case, for Fed chairs). The ECF uses voice-stress analysis to analyze whoever is speaking. Our software measures inflections in the speakers' speed of speech, tone, hesitation levels, and even changes in "breathiness." Then it compares that against their spoken words and the numbers to generate two types of markers – "questionable" and "confident." Put simply, it lets us compare the speaker's words with their feelings... and the actual numbers and forecasts. When they don't line up, something is in serious need of deeper investigation. And that's what happened when we took a closer look at Warsh's speech. As we said, Warsh's tone was quite hawkish on the surface...He made it clear that he's focused on controlling inflation using the tools at his disposal. That's primarily a reference to rate hikes. And that's why the market panicked. (It didn't help that half of the FOMC members have said they expect at least one rate hike this year.) That said, Warsh mentioned during his April confirmation hearing that he isn't so worried about inflation sticking around. In fact, he believes that when you strip out the effects of the Iran war, inflation is still trending in the right direction.
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The discrepancy prompted us to dive deeper into his FOMC comments surrounding inflation. And sure enough, when Warsh was discussing his willingness to tackle inflation using interest rates, he generated a "questionable" ECF marker. That doesn't necessarily mean Warsh is lying. But it could mean he's not saying everything on his mind. It's impossible to know his intentions for sure...But we interpret Warsh's answers as an exercise in diplomacy. He was trying to establish his independence from Trump and gain some trust in the market. It's typical for Fed chairs to generate a lot of questionable ECF markers. Part of the job is walking the tightrope of public perception. Warsh seemed to do a good job of establishing himself as independent from the president... while also making it clear he's going to operate differently than prior chairs. He isn't going to ignore the data in front of him. But we don't get the sense that he'll commit to a path he feels forced to follow. (He also generated some questionable markers when talking about Fed guidance, which is when central-bank officials submit their thoughts on where interest rates are headed. Warsh actually refused to submit his own guidance.) The market is already expecting at least one rate hike this year... which means if the Fed does hike rates, it won't be a big surprise.
That said, if Warsh convinces the Fed to keep rates steady... or possibly even cut rates... it could drive the market and economy even higher. Regards, Joel Litman
June 29, 2026
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