Gold price buckles under Warsh’s inflation fixation as Fed hikes rates

Following its monetary policy meeting Wednesday, the Federal Reserve announced a 25-basis-point rate hike, pushing the federal funds rate to a range of 3.75% to 4.00%.

At the same time, the committee’s updated economic projections, also known as the dot plot, showed a year-end rate of 4.1%, suggesting at least one more rate hike this year. Despite the hawkish positioning, gold prices managed to hold support above $4,300 an ounce.

However, that level proved to be short-lived as Warsh began his press conference with aggressive messaging, reiterating his commitment to bringing inflation down to the central bank’s 2% target.

“The plain fact is that inflation is too high, and has been for too long. This summer's inflation readings do not tell me that underlying trends have meaningfully improved,” he said in his opening remarks.

Spot gold last traded at $4,256.50 an ounce, down nearly 1% on the day.

Warsh reiterated his focus on price stability numerous times during the 30-minute press conference.

“We are committed to a discipline, not to a decision. Today's action starts to show we are serious about this. And we will deliver on the price stability objective,” he said.

Warsh also reiterated that with economic growth remaining fairly resilient, the biggest concern for the Federal Reserve is persistent inflation.

Warsh also downplayed the recent rise in bond yields. This week, the yield on the 10-year Treasury rose to its highest level since 2007, pushing above 5%.

Warsh said that stronger economic growth throughout 2026 has helped push yields higher, while a surge in spending and heavy borrowing by large technology “hyperscalers” has intensified competition for available capital. Warsh added that geopolitical hot spots around the world are also putting upward pressure on long-term yields, particularly through their broader impact on energy and agricultural commodities, as well as the costs of products that ultimately reach U.S. consumers.

Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, said that resilient inflation, consumer spending, and economic growth have boxed the Fed in, forcing the central bank to raise interest rates even if doing so threatens to weaken economic activity.

“On the other hand, Chairman Warsh threaded the needle very well in that he said that the Fed needed to raise rates today, but he wouldn’t prejudge which would happen at future meetings. The history is clear that once the Fed begins raising rates, they do it multiple times, but the pattern is less clear about whether they will raise rates at consecutive meetings or leave rates unchanged at some of the meetings in between this meeting and future ones where they do raise rates (as we believe to be most likely),” he said.

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