The Federal Reserve held its benchmark interest rate steady at 3.50 to 3.75 per cent on Wednesday, but the unanimity of the decision masked a sharp hawkish pivot under its new chairman, Kevin Warsh. In a statement stripped to just 132 words — less than half the length of its predecessor — the central bank jettisoned all forward guidance, a tool it had used since 2003 to signal the likely path of policy. New quarterly projections showed nine of the 18 voting members now expect at least one rate increase by year-end, with six anticipating multiple hikes. Warsh himself declined to submit a rate forecast, a break with tradition that underscored his distaste for telegraphing intentions. The vote was the first unanimous decision in a year, yet the dot plot revealed a committee deeply split over whether to tighten further.

Viewed from Washington, the meeting marked a deliberate departure from the Powell era. Warsh, appointed by President Donald Trump, used his inaugural press conference to declare that inflation — running at 4.2 per cent in May, well above the Fed’s 2 per cent target — had been elevated “for too long and that will be corrected.” He announced five internal task forces to review everything from data collection to communication practices, promising a “regime change” at the world’s most powerful central bank. The backdrop is a US economy still expanding solidly despite the uncertainty of the Iran conflict, which has driven up energy costs and complicated the inflation picture. Trump, speaking from Paris, said it was “alright” if the Fed held or even raised rates, a striking reversal after months of berating Warsh’s predecessor for not cutting fast enough.

Financial markets absorbed the message with alarm. The S&P 500 fell 1.5 per cent, the Dow Jones Industrial Average shed more than 500 points, and the tech-heavy Nasdaq dropped 1.4 per cent — the worst debut for a new Fed chair since 1994. The two-year Treasury yield surged 16 basis points to 4.21 per cent, while the dollar jumped and gold retreated 1 per cent. Analysts in London noted that money markets swiftly priced in a full quarter-point hike by October. From São Paulo to Mumbai, the prospect of a more restrictive Fed rippled through emerging-market assets, raising the spectre of capital outflows and currency pressure just as many economies were hoping for a softer dollar.

Whether the projected hikes materialise remains uncertain. Much depends on the trajectory of inflation and the fate of the tentative US-Iran peace deal expected to be signed on Friday, which could ease oil prices and dampen price pressures. Warsh’s refusal to offer his own rate projection, combined with the abolition of forward guidance, means markets will have less visibility into the Fed’s thinking going forward. The new chair has positioned himself as a steward of price stability rather than a trustee of market expectations, and his reform agenda suggests further changes to the institution’s operating framework are coming. For a global economy still grappling with geopolitical shocks and uneven growth, the Warsh era begins with a message that the era of predictable, telegraphed monetary policy is over.