Morgan Stanley Warns U.S. Treasury Volatility Could Rise if Warsh Leads Fed

Morgan Stanley warned on February 2, 2026, that U.S. Treasury market volatility could rise significantly if Kevin Warsh becomes Federal Reserve chair, citing a likely shift toward less transparent communication that would heighten policy uncertainty for investors. The bank noted Warsh’s historical preference during his 2006–2011 tenure as Fed governor for minimizing forward guidance, arguing markets should independently assess economic data rather than rely on central bank cues. This approach, if extended to a chairmanship, could erode consensus on the policy path and amplify actual market volatility. Morgan Stanley highlighted that recent stability in interest rate markets stems from the Fed’s consistent, transparent messaging under Chair Jerome Powell, who has emphasized public understanding of policy rationale. The firm also flagged risks from potential reductions in pre-meeting media engagement or discontinuation of the dot plot and economic projections. While some market participants argue Warsh may still pursue data-driven, consensus-based decisions, Morgan Stanley stresses that any retreat from current communication norms would widen divergences in rate expectations.