The Federal Reserve on Wednesday followed through on expectations for no interest rate change, and Chairman Kevin Warsh offered little direction in his news conference. The meeting was notable for a surge in dissenting votes, while Warsh looked to provide some clarity on the board’s thought process.

Here are the five biggest takeaways from this week’s Fed actions:

1. The “family fight” returns: Three voters on the Federal Open Market Committee voted against the hold, favoring instead a quarter percentage point hike. “I asked for a good family fight, and I got one. That’s the purpose. That’s the design feature,” Warsh said. “There was a lot more interaction between and among my colleagues. It was a real family fight.” All the “no” votes came from regional presidents: Lorie Logan of Dallas, Neil Kashkari of Minneapolis and Beth Hammack of Cleveland, none terribly surprising given previous statements they made.
2. Another short and sweet statement: Other than detailing the “no” votes the statement was unchanged and still dramatically shorter than the Fed norm. “As before, the policy statement conveys just the facts. It’s steering clear of forecasting, a choice we consider especially prudent at these uncertain times,” Warsh said. “Uncertainty, however, does not mean a lack of clarity.”
3. Dedication to slaying inflation, but …: Warsh again stated the Fed’s resolve to keep inflation under control, but braced markets and the public that it won’t be an easy fight nor will it end soon. “We’ve got no magic wand,” he said. “This isn’t something that we’re going to be able to carry out in days or weeks.”
4. Revolt in the market: Despite the chairman’s tough talk on inflation, markets weren’t having it. Treasury yields at the long end of the curve soared, even as the policy-sensitive 2-year dipped. Translation: We think you’re going to keep short-term policy rates in check, and it’s going to create a ton of inflation later. The 30-year bond was the biggest gainer, roaring higher by 11.5 basis points to 5.211%, its highest yield since 2007 and seemingly undercutting Warsh’s inflation warrior credentials.
5. No clues on September: Investors looking to get any further hints on whether the Fed will hike at the Sept. 15-16 FOMC meeting were largely out of luck. The statement offered no clues, either on forward guidance or even on the reaction function, and Warsh was at best cryptic on which way he will push. “So I take seriously that the pullback of forward guidance requires some transition. Reform isn’t easy, but our general judgment is going to help us make better decisions, and in so doing, satisfy our remit,” Warsh said.

They said it

“No doubt, in some of your commentaries today, you’ll talk about a divided Federal Reserve. Well, that’s not the feeling I felt the last couple of days and the couple days before. What I felt was a group of professionals, all the different perspectives, different views, different judgments, but eager to roll up their sleeves and have a family fight, and eager to reform the way in which the Fed does policy.” — Warsh, commenting on the tenor of the two meetings he’s chaired so far.

“We have long argued that September not July is when Warsh faces a binding credibility test/trap. If inflation and/or the war and energy run relatively hot over the summer he will have to hike in order to preserve his credibility. The key difference is that September is in a broad sense data-dependent while July was Warsh preferences dependent.” — Krishna Guha, head of global policy and central bank strategy at Evercore ISI.

“[T]he Warsh Fed seems to be turning a blind eye to the message the bond market’s higher yields are sending about the inflation risks. Stay tuned. The reform-oriented Federal Reserve under Chair Warsh is looking like a bust. The bond market wants answers, but is getting nothing in return.” — Chris Rupkey, chief economist at Fwdbonds.