Bond traders are rapidly repricing the Federal Reserve’s policy path after Kevin Warsh used his first meeting as Fed chair to deliver a more hawkish message on inflation.

More than 500,000 August fed funds futures contracts changed hands on Thursday, according to Chicago Mercantile Exchange data cited by Bloomberg. The volume was roughly four times the 20 day average and marked a record for the contract.

The surge came after Warsh emphasized the Fed’s price stability mandate and renewed the central bank’s commitment to bringing inflation back to its 2% target.

“Warsh rarely mentioned employment and brought forward the price stability mandate in his narrative,” said Christophe Boucher, chief investment officer at ABN AMRO Investment Solutions. “The start of his term signals that the Fed will be much more focused on inflation.”

The August fed funds contract expires before the Fed’s September policy meeting, making it a direct vehicle for wagers on the July 31 decision. Open interest in the contract rose by 67,000 futures, equal to about 15% of the outstanding risk in that tenor.

That shift suggests traders are adding fresh short positions that would benefit if the Fed raises rates as soon as next month.

Before Wednesday’s Fed meeting, swaps were pricing almost no chance of a July hike. By Thursday, the implied odds of a quarter point increase had moved close to a coin flip.

The shift also showed up in SOFR futures, where traders unwound positions tied to a more dovish Fed path. Open interest in June 2026 SOFR futures fell by 90,000 contracts, signaling a retreat from bets on future rate cuts.

Treasuries stabilized on Thursday after the prior day’s selloff. The 10 year yield fell as much as 5 basis points to 4.44% by late afternoon, recovering part of the move that followed Warsh’s comments.

BNP Paribas said it still expects rate hikes to begin in December, but warned that earlier action is now possible.

“Policymaker views appear to be shifting rapidly, and we emphasize that the risks to action skew sooner and that every meeting, including July, is live,” BNP strategists James Egelhof and Guneet Dhingra wrote.

The repricing adds pressure to risk assets that had been leaning on expectations for eventual Fed easing. A July hike would mark a sharp reset from the market’s stance before Warsh’s debut, when traders were still positioned for a slower and more cautious policy shift.