No Guidance: Warsh's Hawkish Fed Debut, and the Disinflation It Ignored

A green week that undersells the drama

On the scoreboard, it reads quiet. The S&P 500 finished up 0.9% at 7,500 — its 11th winning week in the last 12. The Nasdaq did better, up 2.4% to 26,518. The Dow added 0.7% to 51,565. But that Dow number hides the week it had: on Tuesday it printed a fresh record close just shy of 52,000, before the Fed knocked it back on Wednesday.

The order is the whole point. Monday was a relief rally — the U.S. and Iran agreed to a framework to end the war and reopen the Strait of Hormuz, oil tumbled, and risk caught a bid. Tuesday split: the Dow ran to its record on strength in names like Goldman Sachs and Caterpillar while tech wobbled and the Nasdaq slipped, the market holding its breath into the Fed. Wednesday it exhaled the wrong way. And Thursday it clawed most of it back on a chip-led bounce. Four sessions, two regime-level shocks, a net gain that tells you almost nothing about the ride.

Warsh’s debut: rates held, the dots flipped, guidance gone

The Federal Reserve held its benchmark rate at 3.50% to 3.75%. That part was fully expected — markets had priced a hold at better than 90%. The surprise was everything around it.

The updated projections cut the Fed’s growth forecast for the year and raised its inflation forecast — slower growth, stickier prices. And the dot plot moved the way almost no one positioned for: nine of the 18 officials now pencil in at least one rate hike this year, and six of them see more than one. Coming into 2026, this market was pricing cuts. The bias just flipped.

Then Warsh did the thing the market is still chewing on. He scrapped forward guidance — telling reporters he couldn’t say what the Fed would do next, and that the Fed shouldn’t be in the business of telegraphing its moves at all. For years, the central bank has tried to signal its path in advance. Warsh turned the signal off. Stocks sold into the Wednesday close, the S&P down 1.21% and the Nasdaq down 1.34%, the 10-year Treasury yield jumped to roughly 4.5%, and the VIX spiked 12% on the day.

Oil collapsed — and the Fed leaned hawkish into it

Here’s the irony that defines the week. The single biggest driver of this year’s inflation was the energy shock from the Iran war. This week, that shock started unwinding. West Texas crude fell to around $75 a barrel, down roughly 14% in five days. The national average for gas dropped below $4 for the first time since March, off this year’s peak near $4.60. That is textbook disinflation, arriving in real time — and the Fed got more hawkish in front of it.

Why lean hawkish into your own good news? Because inflation has run hotter than expected for four straight months, the labor market is still firm — jobless claims held near 226,000 and unemployment has sat at 4.3% for three months — and Warsh, by reputation and now in practice, would rather keep his options open than promise cuts the data hasn’t earned. The peace dividend helps the inflation picture. It does not, on its own, get this Fed to ease.