Fed Chair Warsh to Attend Congressional Hearing Tuesday: Two Key Points for Investors

TradingKey - At 10:00 AM ET on Tuesday (July 13), Fed Chair Warsh will testify before the House Financial Services Committee, facing lawmakers' questioning on the Fed's semi-annual monetary policy report. This will be the first time Warsh delivers the semi-annual monetary policy report to Congress since taking office as Fed Chair. Subsequently, he will also testify before the Senate Banking Committee on July 15.

Ninety minutes before the hearing, the U.S. will also release the Consumer Price Index for June. Since the CPI data will be released at 8:30 AM ET, Warsh's response to inflation and interest rates will be directly influenced by the latest figures. If inflation is higher than expected, the market will focus on whether he supports hiking rates as early as late July or September; if inflation cools down, whether he still insists on prioritizing the restoration of price stability will also be a key focus.

For this hearing, investors need to pay attention to how Warsh describes the current inflation situation and whether he signals rate hikes within the year. The Fed's latest report noted that U.S. inflation heated up further this spring, with tariffs, rising energy costs triggered by the war in the Middle East, and increased investment in AI infrastructure all driving up price pressures. The Fed's preferred Personal Consumption Expenditures (PCE) price index remains about twice its 2% target, while the June unemployment rate held at 4.2%, indicating that the labor market has not yet deteriorated significantly.

The second point of interest is whether Warsh will continue to refuse to provide forward guidance on interest rates. Warsh has previously stated that the Fed should not commit to a future policy path in advance but should make decisions based on real-time economic data. Therefore, even if he does not explicitly discuss the next meeting, the market will still judge his policy stance from phrasings such as "inflation risks," "policy restrictiveness," and "patience."

In addition, Warsh has established five working groups to study policy communication, the balance sheet, economic data, artificial intelligence and productivity, and the inflation framework. Whether these reforms will change the Fed's future decision-making and communication methods is also worth watching. Lawmakers are likely to question him on the Fed's independence, balance sheet policies, and reform plans.

As for the markets, if Warsh delivers clearer rate-hike signals, U.S. Treasury yields and the U.S. dollar may rise, putting pressure on U.S. stocks and gold; if his stance is more cautious and emphasizes waiting for more data, market expectations for a July rate hike may cool down, which would benefit equities and gold ( XAUUSD) and other risk assets.