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The Full Picture
Forward Guidance Gave Markets a Map. Warsh Wants to Take It Back.
Fourteen Years of Training, One Press Conference to Undo
Bernanke introduced the dot plot in 2012. For fourteen years, traders built models around median dots. Mortgage originators priced rate locks against the forward path. Currency desks used the dot spread between the Fed and ECB to size dollar positions.
Warsh considers that conditioning a problem. He called the framework “overly prescriptive” and told senators he prefers “a good family fight” without the market reading every word as a promise. His model is Greenspan-era: data-dependent, meeting-by-meeting, more discretion, less obligation to preview.
The March Dots Are Already Dead
March’s SEP, published under Powell, showed two cuts in 2026. Since then: May CPI came in at 4.2%, PPI hit 6.5% (highest since November 2022), and April’s 8–4 FOMC vote saw three dissenters push to drop the easing bias entirely.
Those dots were drawn in a different inflation regime by a different chair. If June’s dots survive, they will almost certainly show at least one hike in the median. FinanceCalendar estimates two hikes in the median would trigger significant yield and equity repricing.
Three Scenarios, Three Price Paths
Scenario A: Warsh kills the dot plot. Uncertainty premium rises. The 10-year backs up. The dollar strengthens on ambiguity. Rate-sensitive equities reprice without a roadmap.
Scenario B: dots survive, show one or two hikes. The sharpest March-to-June reversal since 2022. Treasury yields rise hard at the 2-year. Growth sells off. The Iran disinflation trade runs into a wall.
Scenario C: dots survive, show neutral. Goldilocks. But it requires Warsh to corral a committee that voted 8–4 in April. The last time this many dissenters sat at the table was 2019.
What the Iran Trade Has Not Priced
Monday’s Iran relief trade assumed the dot plot exists to confirm the softer path. If Warsh removes the dots, the confirmation mechanism vanishes. Our view: the Iran trade is directionally correct but structurally exposed. It needs a map that may no longer exist by Thursday morning.
Worth watching: whether the 2-year yield moves more than the 10-year after Wednesday’s release. If it does, the market is repricing the near-term path. If the 10-year leads, the market is repricing the regime. That is the bigger trade.
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