Traders are betting overwhelmingly that the Federal Reserve won't raise interest rates when it meets later this month. But that judgment rests in part on assumptions about how the Fed communicates that may no longer hold under its new chairman. Kevin Warsh has left room to maneuver toward a hike, should he choose to use it. To be clear, Warsh said outright at an International Monetary Fund event in Bangkok Friday morning that he wasn't signaling a decision one way or the other. His remarks nonetheless reinforced a judgment in the markets that the Fed would pause its rate increases, with the futures market assigning a 15% probability to an October hike as of Friday morning.
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