Fed Chair Warsh's Hawkish Stance Sparks Rate-Hike Bets, but Major Firms Expect Rate Cuts by Year-End

U.S. bond markets are sharply divided on Federal Reserve policy as new Chair Kevin Warsh's inflation-fighting stance reshapes rate expectations. Rate futures show investors betting on possible rate hikes before autumn and further increases next year; however, major asset managers including Citigroup and BofA Securities predict the Fed may ultimately hold rates steady or cut, citing easing oil prices, cooling labor market, and slowing economic growth.

Warsh's emphasis on restoring the Fed's inflation-fighting credibility has already shifted market pricing, with yield curves flattening as short-term rates rise faster than long-term rates. Citigroup forecasts the next Fed move could be a 25-basis-point rate cut as early as October, while BofA sees room for three more 25-basis-point hikes this year, underscoring the wide divergence among institutions on monetary policy direction.