The S&P 500 dropped 1%, heading toward its lowest close since July. The Dow Jones Industrial Average fell 1.7%, or more than 700 points, with financial shares leading the decline. The Nasdaq Composite fell 0.8%. The 10-year Treasury yield held near 5% a day after touching its highest level since 2007, and the dollar index climbed 0.6% to its strongest since late July.

Markets had priced in the quarter-point increase itself and initially took it in stride. All three indexes were higher before the 2 p.m. decision. The selling started during the press conference.

Warsh was on a tightrope going in. The question was whether he’d frame the hike as a one-off adjustment—which risked the bond market reading it as too little to deter inflation—or as the start of a longer cycle. He did neither, and instead went in a more hawkish direction. “I would be hard pressed to describe broad financial conditions as restrictive,” he said in his opening remarks. “This view was widely shared by the committee, so we removed a dose of accommodation.”

That’s a new way of describing a rate hike, and one investors aren’t used to. Under his predecessor, Jerome Powell, the Fed called policy “modestly restrictive,” meaning rates were already high enough to slow the economy. Warsh was saying that at 3.5%–3.75%, they weren’t—and by implication, one quarter point may not have gotten them there either. Asked directly, he declined to say whether policy is restrictive now.

He also distanced himself from the Fed’s own projections, which show one more hike this year and then a pause through 2027. “Those aren’t my forecasts,” he said. “Those are the forecasts of my 18 colleagues.” Warsh has not submitted his own projection since taking the job in May. Asked whether the hike would be followed by a sequence, he said, “I’m not in the forward guidance business.”

For equities, which had hoped the Fed would hike a little and stop, that was a bad combination: a chair who thinks rates are still too low, won’t say how much higher they need to go, and won’t endorse the forecast that says the answer is “not much.”

“If the economy keeps up like it has, the Fed is telling us that we may not see a cut until 2028,” Jeffrey Roach, chief economist at LPL Financial, wrote in a note after the meeting. “Instead, another hike may be on its way.” Chris Zaccarelli, chief investment officer at Northlight Asset Management, noted that “the history is clear that once the Fed begins raising rates, they do it multiple times.” Fed funds futures now show traders split on whether the next hike comes in October.

Not everyone agreed. Michael Pearce, chief U.S. economist at Oxford Economics, expects one more hike and then a stop. “We don’t think this is the beginning of another major tightening cycle,” he wrote, “and markets have too much tightening priced in over the coming year.”