Warsh Reshapes Fed: Forward Guidance Abandoned, Balance Sheet Reduction

New Fed Chair Kevin Warsh is ditching forward guidance, targeting balance sheet reduction, and rethinking inflation metrics. The bond market is reacting with higher yields and volatility. The Warsh rate-hike trade collapsed after soft July data (CPI, retail sales, jobs). The July FOMC minutes due this week are expected to confirm three dissents, reinforcing the divided FOMC.