The Fed Isn't Cutting Interest Rates Anytime Soon -- and Kevin Warsh Is Putting the Blame Squarely on President Trump

President Donald Trump has long sought a new person at the helm of the Federal Reserve. He got what he wanted -- and the person he wanted -- when Kevin Warsh was sworn in as the new Fed chair on May 22, 2026. But the president might not get the rate cuts that he wants from Warsh.

The Federal Reserve Open Market Committee (FOMC) met for the first time last week with Warsh as leader. Based on the results of this meeting, the Fed seems unlikely to cut rates anytime soon. What's more, Warsh is subtly putting the blame squarely on President Trump.

Image source: Official Federal Reserve Photo.

The FOMC's clear message

President Trump told an audience only hours after Warsh's swearing-in ceremony that interest rates would be lower "very quickly." He said, "You watch what's going to happen. I had a rotten head of the Fed, and now I have a great head of the Fed." The president added later, "You get the interest rates down, everybody's going to be very, very happy."

However, Warsh and the FOMC didn't make Trump happy last week. Any expectations that the FOMC would lower rates in Warsh's first meeting quickly evaporated. The 12 members of the committee unanimously agreed to hold the federal funds rate steady at 3.5% to 3.75%.

The FOMC issued a press release saying, "Inflation remains elevated relative to the Committee's 2 percent goal." This statement emphasized, "The Committee will deliver price stability." It also reaffirmed the policy of "maintaining ample reserves in the banking system."

Warsh didn't participate in the Summary of Economic Projections issued following the latest FOMC meeting. However, the responses from other FOMC members reflected a median estimate of the fed funds rate at 3.8% by year-end, higher than the 3.4% projection in March. Nine members of the committee expect at least one rate increase in 2026. Only one member predicted a rate cut this year.

Blaming without naming

Neither Warsh nor the other FOMC members specifically named President Trump in their statements about the decision to maintain rates at current levels. But they didn't have to mention his name to make their point.

The committee acknowledged that economic activity continues to expand "at a solid pace." However, the FOMC's statement also noted that this growth has occurred "despite elevated uncertainty that owes, in part, to the conflict in the Middle East."

More importantly, the FOMC said that one reason why inflation remains high is that it reflects "supply shocks that have driven price increases in certain sectors, including energy." The specific references to "supply shocks" and the energy sector are unambiguously pointing to the Iran war, which President Trump initiated along with Israel.

In the press conference following the FOMC meeting, Warsh was asked directly if he had spoken with President Trump since the swearing-in ceremony. He replied, " So on the president, I don't have anything for you." He did say, though, that he has carried on a tradition by meeting Treasury Secretary Scott Bessent for breakfast three times. While Warsh didn't provide details about their conversations, he said that he's interested in "what's happening in the Middle East."

Rate cuts are dead. What does it mean for the stock market?

Following the FOMC meeting and Warsh's press conference comments, CME Group's (NASDAQ: CME) FedWatch, which tracks futures prices of 30-day Fed funds, estimated a 36.3% chance of a rate hike at the next FOMC meeting and 0% chance of a rate cut. Furthermore, FedWatch predicts no rate cuts for the rest of the year, with the odds of a rate increase rising to 85.5% by the FOMC's last 2026 meeting in December.

The bottom line is that rate cuts appear to be dead, but the prospects of rate hikes are alive and kicking. What does this mean for the stock market?

Perhaps most importantly, investors should expect volatility. Even with the memorandum of understanding signed by the U.S. and Iran to establish a peace agreement, there's no guarantee that the Strait of Hormuz will remain fully open. Oil prices could remain elevated for a while compared to pre-war levels.

Buying assets that are resilient when rates increase could be the best bet. Big bank stocks and insurance stocks tend to hold up well during periods of climbing rates. Consumer staples stocks can also provide stability for portfolios when interest rates rise.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CME Group. The Motley Fool has a disclosure policy.