Mr. Crowley
In his debut album following his departure from Black Sabbath, Ozzy Osbourne sang: “Mr. Crowley, what went on in your head? Oh, Mister Crowley, did you talk to the dead?” Last week, Federal Reserve Chairman Kevin Warsh gave his second Federal Open Market Committee (FOMC) press conference, and his messaging was reminiscent of the style of a late predecessor. Alan Greenspan, like Warsh, prioritized supply-side economic drivers, while avoiding transparency. Greenspan was famously quoted saying “If I turn out to be particularly clear, you’ve probably misunderstood what I said.” Ozzy was singing about the infamous English occultist and ceremonial magician Aleister Crowley at the time, but perhaps a similar type of dark magic is needed to thread the needle of monetary policy in these uncertain times.
In his press conference after the FOMC held rates steady at the 3.50% to 3.75% policy rate, Warsh told reporters “[T]he policy statement conveys just the facts. It’s steering clear of forecasting—a choice we consider especially prudent at these uncertain times.” Here, Warsh’s desire is to let markets respond to data in real time without interference from the Fed. (“The central bank need not always and everywhere be the center of attention,” added Warsh.)
The chairman was, of course, asked about inflation, as markets seem to think both that the U.S. is still too high above the Fed’s 2% target and that a rate hike is the best solution to mitigate that problem. Further, Warsh addressed the belief of some market participants that the Fed is actually tolerant of a higher inflationary figure and that the 2% target is merely a ruse. “Let me reiterate,” said Warsh. “There is no soft inflation target, there is no soft implicit target. Not on this Committee’s watch. There is only a target, and it is 2%.”
There is also some angst among market participants that Warsh’s coy, Greenspan-like communication is leading to increased uncertainty and, thus, to heightened volatility in markets. For example, the Morning Brew publication wrote: “The lack of hand-holding from the Fed has led to increased volatility in bond markets and a breakdown in investor consensus about future rates.”
But is it really a Fed chair’s communication style that stirs bond volatility? To find out, we analyzed the experience of Fed chairs from 1997 through 2026 and adjacent 10-year bond volatility. Below, using the intraday range of two-year, five-year, and 10-year high and low yields on FOMC meeting days during 1997 to 2026 (the Greenspan–Powell eras), we found that FOMC days are, in fact, always subject to heightened volatility (Figure 1), irrespective of who is at the helm.
A second takeaway from our analysis: Each Fed President’s era has largely been defined not by the public communication strategy deployed, but by the economic environment of the time. For example, the Bernanke era was a clear volatility standout—with an FOMC day average trading volatility of 12.64 basis points (bps) (Figure 2). Yet this increased volatility was likely not attributable to Bernanke’s communication style (which prioritized forward guidance) but was instead driven by the massive economic crisis of 2008 to 2011, which dominated his time as Fed chair.
Powell’s FOMC days were also higher than non-FOMC days but were not unusually high in a historical context. Greenspan was not a volatility outlier, either. Meanwhile, Yellen’s time as chair was accompanied by very low bond volatility on non-FOMC days, so her balance between FOMC/non-FOMC days was outsized on a relative basis—suggesting that Fed day itself is a catalyst for volatility.
In short, Fed days have historically produced more volatility in the bond market than days without meetings. But the data also shows that the magnitude of the volatility is dependent on economic environments, rather than the communication style of Fed chairs.
The very make-up at the Fed is also a growing uncertainty. Bloomberg reported last week that Fed Governor Michael Barr has been placed in the crosshairs of removal following a review of the 2023 failure of Silicon Valley Bank (SVB) under his watch. According to the article, some Trump administration officials and allies have privately discussed whether the review could provide a for-cause basis to remove Barr from the board.
The review was commissioned by Michelle Bowman, the current vice chair for supervision, the Fed’s top job in banking oversight. Barr held the same position when SVB collapsed after a bank run triggered by a heavy concentration of uninsured deposits and poor management of interest-rate risk. (Frequent readers of Talking Points will also recognize SVB as a massive holder of low, fixed-rate Ginnie Mae project loan MBS, originated in 2020 to 2021, before the Fed embarked on 500 bps of rate increases during 2022 to 2023.) The discussion of Barr’s removal has turned political in recent days though. Removing Barr would give Trump an opportunity to have appointed the majority of governors on the Fed’s seven-member board with some viewing this move as an opportunity to shape monetary policy that is more aligned with the president’s view. Senator Elizabeth Warren, a longtime ally of Barr, has taken issue with the Bowman-commissioned review for months. She’s raised concern that the review is designed to “shift blame” for the SVB failure away from Trump’s deregulation efforts, and that the audit may constitute government “waste.”
“Sunlight is said to be the best of disinfectants. Americans deserve a full accounting of what regulators missed, whether earlier reviews were adequate, and who should be held accountable,” Treasury Secretary Bessent said in a post on X, reprimanding Senator Warren’s comments. In a statement responding to Bessent, Warren questioned whether he is supporting the review as “part of a pretext to illegally fire yet another Fed governor.”
Recall President Trump’s criticism of the Federal Reserve last year, as well as in his attempts to remove Powell and Governor Lisa Cook from their seats on the Board of Governors. For its part, the DOJ officially closed its criminal probe of Powell and referred oversight matters back to the Federal Reserve’s Office of Inspector General. Powell remains on the Board of Governors, breaking a 75-year tradition, and can remain on the Board until May 2026. He is largely expected to stay put until the Inspector General presumably clears him of wrongdoing.
As for Lisa Cook, for context, the Fed governor was accused of mortgage fraud in August 2025 by Bill Pulte, Director of the Federal Housing Finance Agency. The Supreme Court ruled 5–4 that Cook could remain in office while her legal challenge continued, holding that for-cause protections for Fed governors are constitutional and require pre-termination due process, unlike for officials at other independent agencies. The court’s majority emphasized the unique historical independence and structure of the Federal Reserve and decided that the president must provide fair notice and an opportunity to be heard before attempting a for-cause removal. To date, neither the DOJ nor any court has filed formal charges or made any official findings of mortgage fraud against Cook.
As for Barr, Warsh suggested he supports the review during congressional testimony this month, when asked whether he has instructed staff to cooperate with it. “My general rule is that we should be cooperative to investigations and we should try to get to the bottom of the facts on regulatory and supervisory issues,” he said. Barr was appointed by former President Joe Biden, while Bowman was appointed by Trump.
A White House official said the external SVB review is not a way to remove Barr from the Fed’s board. Barr and Bowman declined to comment. This is a story worth keeping an eye on.
Recall, too, that the FOMC consists of 12 voting members: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four rotating regional Reserve Bank presidents. The president appoints Fed governors for 14-year terms, subject to the consent of the Senate. Each governor can be appointed to one full term, although they often fill the remaining years of unexpired terms and may then be reappointed to full terms.
The Fed chair serves a four-year term, separate from and concurrent with, the term as a governor. The vice chair and vice chair for supervision also serve four-year terms. These appointments are subject to Senate approval, too. The current Fed governors are:
Kevin Warsh (chairman): Originally appointed by President Bush in February 2006. He left the board in April 2011. President Trump appointed Warsh as chair and the Senate confirmed him in May 2026. His term as chair expires in May 2030 and as governor in May 2040.
Philip Jefferson (vice chair): Appointed by President Biden. His term as vice chair ends in September 2027 and as governor in January 2036.
Michelle Bowman (vice chair for supervision): Appointed by President Trump. Her term as vice chair for supervision ends in June 2029 and as governor in January 2034.
Michael Barr (governor): Appointed by President Biden. He resigned as vice chair for supervision in February 2025. His term as governor expires in January 2032.
Jerome Powell (governor): Appointed by President Obama (and later elevated to chair by Trump and Biden). His term as chair ended in May 2026 and as governor will end in January 2028.
Lisa Cook (governor): Appointed by President Biden. Her term as governor ends in January 2038.
Christopher Waller (governor): Appointed by President Trump. His term as governor expires in January 2030.
Last week’s FOMC meeting thus put Warsh’s Fed directly in the spotlight, as markets questioned whether the Fed is well positioned to tamp down inflation. Fed officials Hammack, Kashkari, and Logan all dissented to holding rates steady in favor of a quarter-point hike to combat stubborn inflation.
As is typical, the dissenters made statements on Friday; Dallas Fed President Logan said she can’t see inflation returning to the 2% target without central bank action: “Without any policy restraint, inflation will likely continue to trend above target until there’s an unanticipated shock.”
Logan’s statement echoed both Kashkari and Hammack, who also cautioned that delayed action could create the need for more aggressive action later. Some market participants agreed with the dissenters, while the Fed’s credibility on inflation remains a subject of active debate.
As Ozzy Osbourne also crooned in Mr. Crowley, “I hear maiden’s call, approaching a time that is drastic, standing with their backs to the wall,” it would seem that the Fed’s back is now against the wall. On the other hand, perhaps the market got ahead of itself in calling for the rate hike last week, because incoming data may still give the Fed room to bring inflation down without raising rates.
FROM THE DESK
Agency CMBS — Volumes picked up last week—as is typical around month end—with roughly $1.5 billion Fannie Mae DUS and $1 billion Ginnie Mae newly issued. Fannie spreads were flat to one bp tighter, while Ginnie spreads were one to two bps wider, week over week.
Municipals — AAA tax-exempt yields rose across the curve for a third straight week amid elevated new issue supply, softer investor sentiment, and continued interest-rate volatility. Multifamily cash-collateralized and M-TEB transactions experienced spread widening, as investors demanded additional concessions to absorb the heavy calendar. Attention is now turning to the August 1 reinvestment period, which should provide a meaningful technical tailwind through coupon and principal redemptions. Municipal bond mutual funds posted $761 million of inflows during the week, while high-yield municipal funds saw $300 million of outflows, extending the recent trend of risk-averse positioning among investors.
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