Fed Chair Warsh's Hawkish Stance Fuels July Rate Hike Bets, Drives Record Futures Trading

Federal Reserve Chair Kevin Warsh's inaugural policy meeting on June 17, 2026, dramatically shifted market expectations, with traders now heavily betting on a July 31 rate hike. This hawkish pivot, driven by Warsh's focus on inflation control, propelled federal funds rate futures trading volume to a record high on June 18, 2026. Data from the Chicago Mercantile Exchange (CME) on June 18, 2026, showed over 500,000 federal funds rate futures contracts traded, four times the recent average. Open interest for August 2026 contracts surged by 67,000, signaling aggressive positioning for an earlier hike. The market now prices a nearly 50% chance of a 25 basis point rate increase at the Fed's July 31, 2026, policy meeting. ABN AMRO Investment Solutions CIO Boucher noted Warsh's press conference emphasized price stability over employment, reinforcing the Fed's anti-inflation stance. This shift also triggered a significant unwinding of rate cut bets in the Secured Overnight Financing Rate (SOFR) futures market, with June 2026 SOFR open interest decreasing by about 90,000 contracts.