Federal Reserve Chair Kevin Warsh has two indirect ways to raise interest rates without adjusting the federal funds target rate. The first is through a significant reduction of the central bank's $6.74 trillion balance sheet by selling long-term Treasury bonds and mortgage-backed securities, which would push bond prices down and yields up, increasing borrowing costs. The second is Warsh's deliberate reduction in forward-looking guidance, including potentially eliminating the dot plot, which could increase bond market volatility and prompt traders to push Treasury yields higher amid elevated inflation. These tools come as U.S. trailing 12-month inflation hit a three-year high of 4.2% in May, driven by energy supply disruptions from the Trump-led Iran war, and as nine of 18 FOMC members project a higher federal funds rate by year-end 2026.