Kevin Warsh ‘most hawkish’ Fed chair since Volcker

Binaya Dahal

Journalist

22 June 2026

Franklin Templeton’s Sonal Desai has praised the hawkish tone of new Federal Reserve chair Kevin Warsh in his first press conference, saying it was “a welcome return to a more orthodox monetary policy”.

Desai, fixed income CIO at the $1.66 trillion asset manager, said it was puzzling that many in markets and the media believed Warsh would take the job simply to fulfil US President Donald Trump’s desire for lower interest rates.

“I have argued in public and in client meetings that, based on his track record, if anything Warsh seemed likely to be the most hawkish Fed chair we have seen since Paul Volcker in the 1980s,” she said.

“His first press conference seemed to confirm this. Warsh stressed up front and repeatedly that the Fed can and will bring inflation back to the 2 per cent target, after missing it to the upside for five straight years.”

She noted Warsh’s predecessor, Jerome Powell, also consistently said low and stable inflation was a necessary precondition for strong long-term growth and employment, but Warsh’s decision to stress this amid an unresolved Middle East crisis was telling.

“For a moment, I almost felt myself transported to an earlier stage of my career, listening to then European Central Bank president Jean-Claude Trichet saying that inflation was the only needle in the central bank’s compass,” Desai said.

In the press conference, Warsh characterised monetary policy as uneven, saying “it seems tight if you look at the housing market, but not if you look anywhere else, particularly at the performance of financial markets”.

“Again, a different and more hawkish position than Jay Powell, who insisted that monetary stance was moderately restrictive – something on which I have long disagreed,” Desai said.

“Over the past 15 years, a rather unhealthy dynamic has become entrenched between the Fed and financial markets. The Fed has been using forward guidance to influence market expectations as a way of giving further power to monetary policy.

“Financial markets have become almost single-mindedly focused on divining what the Fed will likely do. The Fed, in turn, has become extremely reluctant to disappoint market expectations.”

She said it will take time for all these changes to feed through the pipelines and for financial markets to digest them.

“Investors have begun to more fully price in an interest-rate hike this year, which I see as a plausible outcome,” Desai said.

“The overwhelming consensus before the press conference was that Warsh would be dovish; by contrast, his hawkish tone came as quite a surprise and led to a selloff in rates and a strengthening in the dollar.”