The Fed is forcing Wall Street to do the heavy lifting. Use these benchmarks to find your footing.

By Felix Vezina-Poirier

Fed watching is looking very different now. Two charts can help you in the Warsh era.

Federal Reserve Chair Kevin Warsh holds a press conference after the FOMC meeting on Wednesday.

Since investors will have less guidance from the Fed, the focus must shift back to the macro data.

The Federal Reserve meeting this week marked the begining of a new era for U.S. monetary policy, and consequently, for investors.

At Wednesday's meeting, new Fed Chair Kevin Warsh gave investors the first real clue about his plans for the central bank: Speak less, guide less and force markets to do more of the work. It is still early and more changes are on the way, but two charts in particular can help investors navigate this new era.

The first signals

So far, the major change is more sparse communication. The Fed's policy statement was significantly trimmed, left with "just the facts," as Warsh said. Importantly, the easing bias that drew dissents at the last meeting was removed.

Still, while more nimble, the message leaned hawkish. The statement stressed the Fed's commitment to price stability, but not the full employment mandate, suggesting inflation is the focus and that interest-rate cuts are off the table for now.

While Warsh avoided giving guidance in the press conference, the "dot plot" carried a hawkish tilt. Unemployment was revised lower for 2026, while inflation was revised higher. Even though Warsh did not submit a forecast, nine of the 18 participants penciled in a 2026 rate hike.

A shorter Fed statement is probably a good thing. Longer, detailed guidance about what the Fed will do was a legacy of two recent episodes: the global financial crisis and the COVID-19 pandemic.

There is, however, an asymmetry in what central-bank watchers call "forward guidance." Financial conditions are the main channel through which the Fed affects activity, and forward guidance matters most when rates are near zero because it helps avoid a premature tightening of conditions.

That was also a world where the main concern was low growth and high unemployment. The current macro landscape is different. Inflation is the main concern. In such a world, higher interest-rate volatility can be acceptable, as it tightens financial conditions.

Goodbye to guidance?

There is an important nuance to the changes Warsh has made to Fed communications so far. While explicit guidance was removed, some implicit guidance remained as inflation was prioritized over employment. This matters.

The Fed can ditch explicit guidance, but it cannot ditch risk management. The most important intellectual work done by central banks is risk management. Monetary policy does not depend only on one theory of growth and inflation. It also weighs upside and downside risks.

In other words, the tails matter, not just the belly of the distribution. This is unlikely to change, no matter who is in the seat.

Two charts for the Warsh Fed

Warsh is going to make Fed watching great again.

Since investors will have less guidance from the Fed, the focus must shift back to the macro data.

One simple way to predict where the Fed's focus will be is to gauge the deviation of inflation and unemployment from the dual-mandate benchmarks. For inflation, that means looking at core PCE's deviation from the 2% target. For full employment, it means looking at unemployment's deviation from estimates of the natural rate of unemployment.

Periods where inflation deviates more from target than unemployment are associated with tightening monetary policy. Conversely, periods where unemployment is a bigger issue than inflation have been associated with loosening monetary policy, as shown in the chart below.

One reason why Warsh may want to avoid giving too much guidance is to get cleaner market signals that are not distorted by Fed forecasts.

The second chart investors should keep on their radar is the spread between the 2-year Treasury yield BX:TMUBMUSD02Y, which is a decent proxy for markets' short-term policy expectations, and the federal funds rate.

It is not a perfect relationship, but instances where the 2-year yield crosses below or above the federal funds rate have historically preceded or coincided with turning points for monetary policy.

Investment implications

Expect more market volatility around economic data releases, especially for major releases such as the employment or inflation reports.

We are still early in the Warsh chairmanship, but investors will need to dust off their macro muscles. This new Fed is unlikely to give them the answer in advance.

Investors can also expect more market volatility around economic-data releases, especially for major releases such as the employment or inflation reports. Warsh has downplayed the role of individual reports, saying trends will matter more than a single data point.

Tactically, the timing to introduce a bit more uncertainty and volatility around Fed decisions seems right, as the economy currently does not depend much on interest rates. A bit more volatility around valuations will ultimately be overshadowed by a strong earnings profile.

If anything, Warsh is going to make Fed watching great again.

Felix Vezina-Poirier is the chief strategist for Daily Insights, BCA Research's global cross-asset strategy service. Follow him on LinkedIn and X.

-Felix Vezina-Poirier

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06-20-26 1136ET