Last night, Walsh held his first press conference as Fed Chair. The market was originally hoping to hear about when rate cuts might happen, but the message Walsh delivered was: it’s too early to talk about rate cuts right now. Here are the key takeaways I’ve summarized: 1⃣ No compromise on the 2% inflation target Walsh made it clear that the Fed is firmly committed to achieving the 2% inflation target. This means that even if economic growth slows down, the Fed won’t easily shift to easing policies as long as inflation isn’t fully under control. Fighting inflation takes priority over stimulating the economy. 2⃣ High interest rates may stick around longer Keeping rates unchanged this time was expected. But what really made the market nervous was that Walsh didn’t give any clear signals about rate cuts. Instead, he emphasized that future decisions will continue to be data-driven, not based on market expectations. Translation: the market wants rate cuts, but the Fed isn’t ready to deliver just yet. 3⃣ The Fed will reduce forward guidance This was the most underrated point from last night. During Powell’s era, tools like the dot plot, forward guidance, and officials’ speeches often gave the market a heads-up on policy direction. But Walsh believes the market has become overly reliant on the Fed’s forecasts. Going forward, the market will need to interpret economic data on its own. This could mean significantly higher market volatility in the future. 4⃣ Internal reforms are underway Walsh announced the creation of several task forces to study inflation, employment, productivity, data quality, and the Fed’s communication mechanisms. This shows he’s not just tweaking rate policies but is also reshaping how the Fed operates in the long term. The message from last night can be boiled down to one sentence: rate cut expectations have been delayed. The market had been betting on further liquidity easing in the second half of the year, but Walsh’s stance is clear—let’s see inflation hit the target first, then we’ll talk about rate cuts. Overall, this is bearish for financial markets.