Warsh, Kashkari lead the charge as Fed hawks dominate FOMC consensus

An artificial intelligence-based sentiment model developed by Deutsche Bank reveals that Federal Reserve communications have hardened to their most aggressive level since the peak of the post-pandemic inflation shock in late 2022. This hawkish momentum comes on the eve of the July 28-29 Federal Open Market Committee policy meeting, which is largely expected to feature another rate pause.

According to the report, a restrictive consensus is widely shared across the committee. The bank's proprietary system found that 14 out of 18 Fed officials registered scores firmly above the neutral midpoint. The overall FOMC score edged higher by two-tenths to 6.5, with only a small minority of three members—including San Francisco Fed’s Mary Daly and New York Fed’s John Williams—maintaining modestly accommodative scores slightly above 4.0.

Chairman Kevin Warsh’s initial score stood out, placing him among the Fed's most vocal hawks. His recent public speeches garnered a rating of 7.5—the third-highest among voting members and fifth overall. The algorithm attributed Warsh’s high score to his rigid focus on price stability, his rejection of "transitory" inflation arguments, his preference for a smaller central bank balance sheet, and his reluctance to offer forward guidance. Only Minneapolis Fed President Neel Kashkari registered a more hawkish score at 8.5.

While June's mild Consumer Price Index print lowered the probability of immediate policy tightening, the FOMC remains highly vigilant about upside inflation risks. Pointing to structural factors like AI-infrastructure buildouts and persistent energy shocks, Deutsche Bank still expects the Fed to enact two 25-basis-point rate hikes in September and December, "followed by an extended period of holding rates steady until early 2028."