Investors marked up the probability of a US rate rise in September after Federal Reserve Chair Kevin Warsh used his first international appearance to rule out forward guidance and recommit the central bank to its 2% inflation target. Speaking at the ECB’s annual forum in Sintra, Portugal, Warsh said inflation risks had “come down” in recent weeks, citing the fall in energy prices since the US and Iran signed a memorandum of understanding, but he declined to offer any steer on the next policy move. “We’re going to deliver price stability in the US,” he told the panel, adding that anyone expecting the Fed to tolerate above-target inflation “would be disappointed.”

The stance marks a structural break with the communications regime that prevailed under his predecessors. Warsh confirmed he will not issue forward guidance, a tool he has long criticised for locking policymakers into outdated positions. He told the moderator she would “fail” to extract a rate signal, and he extended the same reticence to economic forecasts. The Fed, he said, would decide on rates only when officials “shut the door” at their next meeting. This posture, viewed from Washington, is part of a wider institutional overhaul: Warsh has created five review commissions to rethink the inflation framework, the balance sheet, and the dot-plot projections, and he signalled that new task-force leaders would be named within a week.

The hawkish tone surprised markets that had initially priced a Warsh-led Fed as more dovish. In Sintra, he stressed the central bank’s independence, a pointed message after the Supreme Court blocked President Trump’s attempt to fire Governor Lisa Cook. Trump, who appointed Warsh, has repeatedly demanded lower rates, but the chair insisted the Fed would remain “an independent central bank at this moment.” Analysts in London note that the Fed’s own projections already show a divided committee: nine of eighteen members expect one to three hikes by end-2026, while eight foresee no change and one projects a cut. Warsh himself predicted a “healthy family fight” at the July meeting.

Alongside ECB President Christine Lagarde, Bank of England Governor Andrew Bailey and Bank of Canada Governor Tiff Macklem, Warsh also addressed the AI-driven capital expenditure boom. He said the US was “likely to be a big winner” and that AI would eventually boost supply, but he refused to be drawn on whether the technology is near-term inflationary, saying it was the central bank’s job to ensure it does not become so. The next factual milestone is the Federal Open Market Committee meeting on 28–29 July, when the internal debate Warsh has invited will first be tested in a rate decision.