A plain-English guide to reading Fed Chair congressional testimony.

Tuesday brings Chair Kevin Warsh's first congressional testimony since being sworn in on May 22. The paired analysis today, The week the hawkish read landed but didn't extend, sets it up as one of the two market-moving events on a calendar-density Tuesday (paired with the 8:30 AM CPI release). Testimonies are the most-watched Fed communication event outside the FOMC decision itself. This piece is the manual for reading them.

What Fed Chair testimonies are

The Federal Reserve Chair testifies before Congress in two formal capacities per year, with additional appearances at congressional invitation. The two formal appearances are the Semiannual Monetary Policy Report (SMPR) testimonies, delivered before the House Financial Services Committee and the Senate Banking Committee once in February-March and once in June-July.

Tuesday's Warsh appearance is the July SMPR delivery to the House. He will testify before the Senate Banking Committee on Wednesday. The two testimonies are substantively identical in prepared remarks; the differences come out in the question-and-answer periods, which each committee runs for two to three hours after the opening statement.

The testimony format:

1. Written statement submitted by the chair to the committee, published on the Fed website at the start of the hearing.
2. Opening oral statement delivered by the chair, typically 10 to 15 minutes. The oral statement is usually a condensed version of the written statement.
3. Question-and-answer period with committee members, structured in five-minute blocks. The chair responds live to questions on any topic within the Fed's mandate.

The written and opening statements are heavily prepared and committee-approved. The Q&A is where the chair speaks extemporaneously, and where the market-moving language often appears.

The four sections that carry policy signal

Section one: the current-conditions read

The opening statement always describes how the Fed reads current economic conditions. This is a straightforward summary, but the specific adjectives and adverbs carry signal.

Language patterns to watch for:

• Inflation as "elevated" vs "declining" vs "moderating." The characterisation of the current inflation reading tells you where the chair sits on the policy path. "Elevated" language signals ongoing hawkish lean; "declining" signals dovish readiness; "moderating" is the middle ground.
• Labour market as "strong" vs "cooling" vs "in balance." The dual-mandate framing depends on this characterisation. "Strong" supports continued restrictive policy; "cooling" opens the door to cuts; "in balance" is the neutral hold framing.
• Growth as "solid" vs "moderating" vs "slowing." Growth language typically follows the labour market language and reinforces the direction.

Section two: the policy outlook

The oral statement typically dedicates two to three paragraphs to what the committee is thinking about next. This section is heavily lawyered — the chair does not commit to specific actions but does describe the framework the committee is applying.

Language patterns:

• "Data-dependent" vs "committed to" vs "prepared to." These three phrases carry very different signals about the near-term policy path. "Data-dependent" is the base framing and commits to nothing. "Committed to" signals an intent that would require material data reversal to change. "Prepared to" is chair-specific language that signals readiness for a specific action.
• "Restrictive" vs "modestly restrictive" vs "appropriate." The description of the current policy stance signals whether the chair believes further tightening is on the table. "Restrictive" (unqualified) implies room to cut; "modestly restrictive" implies near-neutral; "appropriate" is the hold framing.
• "Additional time" vs "reasonable confidence" vs "sufficient progress." These are Powell-era pattern phrases about when the committee will consider easing. Watch whether Warsh uses them or replaces them with his own framing.

Section three: the risk balance

Every SMPR testimony includes a section on the risks to the outlook. The specific direction of risk imbalance is the strongest single signal in the testimony about the committee's near-term policy tilt.

• "Balanced" vs "tilted to the upside" vs "tilted to the downside." Balanced supports the hold framing. Upside-tilted supports hawkish action. Downside -tilted supports dovish action. The June minutes had inflation risks "tilted to the upside" — watching whether Warsh's language maintains, extends, or softens that framing is the highest-signal single read of Tuesday's testimony.

Section four: the Q&A responses

The prepared statement is the committee's view. The Q&A is the chair's view. In the Q&A the chair speaks extemporaneously and the specific phrases can materially shift market pricing.

Question types to watch for:

• Rate-path questions. "Do you expect the committee to cut this year?" or "Are hikes on the table?" The chair's response indicates the framework the committee is applying. Direct answers (rare) are strong signals; deflections to "data-dependent" are the base case.
• Specific-date questions. "Will the July meeting hold?" or "Is September a live meeting?" The chair typically declines to comment on specific dates, but the manner of the decline can signal.
• Framework questions. "Are you concerned about a specific inflation component?" The chair's willingness to engage on specific components signals what the committee is looking at.
• Political-pressure questions. Committee members sometimes attempt to elicit specific responses about the political environment. The chair's neutral framing is expected and the signal is if it slips.

Warsh-specific framings to watch for

Chair Warsh has three months of on-record communication now, with distinct patterns emerging:

Shorter and more assertive statements. The June FOMC statement was cut to 130 words from Powell's typical 340. Warsh's oral testimony will likely be shorter than Powell's and more direct.

Emphasis on inflation absolutism. The July 1 speech contained the phrase "prices are too high," which is materially more direct than Powell's typical "further progress toward the target." Warsh has shown a preference for absolute-language framing over gradual-progress framing.

Reduced forward guidance. Warsh has actively moved the Fed away from committing to future actions in advance. His testimony language will likely include less committed forward guidance than Powell's, with more explicit "the committee will decide meeting by meeting" framing.

Withheld dot projection. The Warsh SEP silence in June, and any commentary about it in Tuesday's testimony, is a specific communications-style signal. The market will interpret any elaboration of the reasoning as directional.

Historical base rates on chair testimonies

Testimonies have moved markets in the following patterns across the last three chairs (Bernanke, Yellen, Powell, now Warsh):

The Fed effect on 10Y yields. The testimony-day yield move on the SMPR days has averaged 3.2 basis points in absolute terms since 2010, larger than the average non-Fed-day move of 2.4 basis points but materially smaller than an FOMC-decision day (average 8.6 basis points).

The DXY effect. Testimony-day DXY moves have averaged 0.35 percent in absolute terms, again slightly larger than base but smaller than decision days.

The reversal pattern. Testimony-driven moves reverse partially within three sessions roughly 60 percent of the time. The initial reaction is often larger than the sustained shift, because Q&A language can be misinterpreted in real time and the market walks back the reaction after fuller reading.

Common misreadings

Reading a specific answer as a commitment. Chairs answer questions to explain the committee's reasoning, not to commit the committee to specific actions. A response that says "the committee will consider the data at the July meeting" is not a commitment to any specific July action; it is a description of the committee's framework.

Trading the initial headline reaction. The live tape during testimony often reacts to headline flashes that summarise specific Q&A exchanges. These flashes are often out of context and get walked back within 15 minutes as the full exchange gets reported. The framework-appropriate posture is to wait for the full Q&A period to conclude before treating any move as sustained.

Assuming both testimonies deliver the same signal. The written and opening statements are identical between the House and Senate testimonies. The Q&A is not. The Senate typically asks more macro-policy questions; the House typically asks more regulatory and political questions. Signal density is higher on Senate day (Wednesday July 15) but the market often reads more into the House session because it lands first.

What to watch on Tuesday specifically

Three specific things will be the signal in the first Warsh testimony:

1. Whether Warsh maintains "prices too high" language or softens to a more Powell-like "progress toward target" framing. Maintaining the absolute framing is materially hawkish.
2. Whether the risk balance language matches the June minutes (upside-tilted inflation risks) or diverges. Alignment supports the hawkish base; divergence would be a communications signal about how the committee has evolved since June.
3. Whether Warsh explains the withheld June dot in the Q&A. Any elaboration on the reasoning will be parsed as directional; the specific direction depends on the framing.

Where this fits

The chair-testimony framework sits alongside the other Fed communication references:

• A plain-English guide to reading FOMC minutes. The structured record of committee discussions.
• A plain-English guide to reading a split Fed committee. How the 9-8-1 June split will inform testimony pressure.
• A plain-English guide to forward guidance. The four eras of Fed communications framing and where Warsh's style fits.

Together they cover the mechanics from committee dynamics to individual communication event. Reading Tuesday's testimony efficiently means applying the framework to the specific phrases and question exchanges, not to the headline flashes.