"It's better to do a little now instead of a lot later," Neil Dutta, the head of economics at Renaissance Macro Research, wrote in a note.
The Fed, under Warsh's predecessor Jerome Powell, cut rates three times in 2025 to head off what most policymakers felt was a weakening labor market that has since stabilized. Inflation, which seemed to be cooling last year, reversed course in 2026, June's improved reading notwithstanding.
A rate hike would not likely be welcomed in the White House.
President Donald Trump skewered the Powell-led Fed for failing to deliver the big rate cuts he thought were needed to boost the economy and he hand-picked Warsh with the hope that doing so would open the door to easier policy. So far, Trump has blamed other members of the Fed's Board of Governors for tying Warsh's hands on rates.
The possibility of a rate cut has garnered almost no backing from Fed policymakers. Their latest projections, published after the end of last month's meeting, showed just one of them anticipating that rates would be lower by the end of this year.
At the other end of the spectrum, and illustrating the uncertainty around the outcome of this week's meeting, one analyst even gamed out the possibility of a supersized half-percentage-point hike.
During his June 17 post-meeting press conference, Warsh said he viewed financial markets as one of the most important sources of information for central bankers. One reason he does not want to tell markets what he is thinking about the appropriate path of interest rates, he said, is to force investors to react to the economic data instead of policymakers' pronouncements.
"With little guidance on the reaction function under the new chairman, markets are filling the void with speculation that Warsh may be eyeing a surprise hike to reinforce anti-inflation credibility," Barclays economists wrote in a note. "The risk is that the speculation itself begins to shape policy."
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