President Donald Trump told the room he wants Kevin Warsh “totally independent” as he swore him in as Federal Reserve chairman Friday, then spent the next hour arguing the economy can boom without inflation.

The price data has other ideas.

Annual inflation hit 3.8% in April, the highest since 2023, up from 2.4% before the war with Iran closed the Strait of Hormuz and sent energy prices climbing.

Core inflation held at 2.8%, well above the Fed’s 2% target. Crude has stayed nearly 50% above pre-conflict levels, keeping pressure on oil names Exxon Mobil ( XOM ) and Chevron ( CVX ) and on prints the central bank cannot ignore.

Polymarket Traders Are Betting On A Hike, Not A Cut

A Polymarket contract on a 2026 rate hike has climbed to around 42%, up from the low teens earlier in the year, on more than $1.25 million in volume.

The repricing tracks recent FOMC minutes, in which most policymakers reportedly saw further tightening as possible if inflation stays above target.

A deeper market on how many times the Fed cuts in 2026 tells the same story.

Traders give zero cuts a roughly 70% chance on nearly $29 million in volume, with the no-cuts outcome surging 55% on the move. A single 25-basis-point cut sits at 17%, two cuts at 8%, and anything steeper in the low single digits.

What Warsh’s Approach Means For These Bets

Warsh has long criticized the Fed for telegraphing its moves, and curtailing forward guidance is one of his stated goals. That would mark a structural shift for prediction markets.

If the Fed stops telegraphing its moves, traders lose the signals they currently price off of. The decision itself becomes the surprise, which makes each contract both more volatile and more useful as the market’s best guess at what the Fed will actually do.

Trump told the East Room crowd that economic growth “does not mean inflation,” framing growth as the route out of the deficit.

Whether Warsh would dare cut into a 3.8% print may be the wrong question to ask. For now, traders are betting the new chair does the opposite.

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