FOMC Meeting Preview: Is Warsh Even Capable of Delivering a Hawkish Hold?

Federal Reserve, FOMC Key Points

• Fed Funds futures traders are pricing in ~90% odds that the FOMC leaves rates unchanged this week, making Chairman Warsh’s press conference particularly significant.
• Given Chairman Warsh’s propensity to limit forward-looking statements in his press conferences, the vote count may be the most actionable tidbit for traders to dissect in this week’s FOMC meeting.
• A true hawkish hold would likely take EUR/USD below 1.1130 to a fresh 17-month low, exposing previous support at 1.1075 and potentially the 1.10 handle in time.

When is the FOMC Meeting?

The October 2026 FOMC meeting will conclude on Wednesday, October 28 at 2:00 ET.

Fed Chairman Kevin Warsh’s press conference will begin at 2:30 ET.

What are the FOMC Interest Rate Expectations?

According to a Reuters poll, 94 out of 100 economists expect the Fed to hold interest rates in the 3.75-4.00% range.

Perhaps not surprisingly, Fed Funds futures traders are pricing in ~90% odds of an interest rate hold this week per CME FedWatch:

Source: CME FedWatch

Looking out to December sets up an interesting contrast. As the chart below shows, traders are pricing in more than an 80% chance that the FOMC will raise interest rates at least once by the end of the year, setting a clear expectation for a hawkish hold this month:

Source: CME FedWatch

FOMC Preview: The Monetary Policy Statement

The dramatically shortened monetary policy statements under Chairman Warsh are likely to continue for the foreseeable future, leaving traders with less to digest from the monetary policy statement itself.

Ultimately, the most interesting part of the statement will be the vote, specifically how many of the twelve members (if any) dissent in favor of an immediate interest rate hike. In particular, Beth Hammack at the Cleveland Fed and Lorie Logan, representing the Dallas Fed, are the most likely hawkish dissenters, with Neel Kashkari (Minneapolis) representing a potential wildcard.

The interpretation of the vote is relatively straightforward: No dissents would throw doubt on a potential December rate hike (a “neutral hold”), one dissenter would support the expected “mildly hawkish hold,” and two or more dissents would reinforce that the decision to hold is a temporary tactical move on the road to a likely December hike (a “true hawkish hold”).

Given Chairman Warsh’s propensity to limit forward-looking statements in his press conferences, the vote count may be the most actionable tidbit for traders to dissect in this week’s FOMC meeting, assuming the FOMC holds rates unchanged as expected.

FOMC Preview: Will Chairman Warsh Set Up December in His Press Conference?

Seemingly to his chagrin, Chairman Warsh has committed to conducting a press conference at every FOMC meeting through the end of the year, so reporters will inevitably grill him for more information about the current state and future outlook for monetary policy.

Perhaps the most important question will be around how Warsh describes the (expected) pause. If he suggests that the tightening in “financial conditions” (read: rising bond yields) are doing the Fed’s job for it and fighting energy-driven inflation, a pause through the rest of the year becomes a distinct possibility. Alternatively, if he explicitly mentions that further tightening may be appropriate and emphasizes keeping inflation expectations anchored, traders would likely read his comments as a true “hawkish hold,” with potentially bullish implications for the US dollar and bearish fallout for indices and bonds.

The other consideration is the awkward timing of this month’s FOMC meeting. The day after, on Thursday, the Fed will get data on Q3 GDP, as well as September Personal Consumption Expenditures, the central bank’s preferred measured of inflation. Meanwhile, the conflict in the Middle East continues to simmer and the US midterm elections are next week. If Warsh emphasizes these uncertainties for a reason to hold, rather than the current underlying economic data, it would further entrench the idea that interest rates could continue to ratchet higher after a hiatus this month.

 

Source: StoneX

US Dollar Technical Analysis – EUR/USD 4-Hour Chart

Source: StoneX, TradingView

Turning our attention to the charts, the world’s most widely-traded currency pair remains rangebound between about 1.1130 and 1.1270, a 150-pip range that has constrained EUR/USD since the start of October. While the Eurozone has its own issues to manage, the US dollar side of the pair should see a straightforward reaction based on the level of hawkishness in the central bank statement and Warsh’s press conference.

A true hawkish hold would likely take EUR/USD below 1.1130 to a fresh 17-month low, exposing previous support at 1.1075 and potentially the 1.10 handle in time. Alternatively, a more cautious statement and press conference that still leaves some doubt about December could lead to an overbought pullback in the dollar, taking EUR/USD back to the middle of its range around 1.12.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX