Fed chair Warsh skips rate projection as nearly half of FOMC members pencil in 2026 hikes

The decision and the dot plot

The Federal Reserve held its policy rate in the 3.50–3.75 percent range on Wednesday. The newly published dot plot, however, painted a sharply different picture from three months ago. Nine of the 19 policymakers now believe they will need to raise rates this year. Six of those nine, nearly a third of the committee, expect more than one quarter-point increase. Just one member pencilled in a rate cut, while eight thought rates should stay unchanged. In March, no official had projected any tightening and the committee had forecast a single cut in 2026.

The committee is unambiguously and unanimously committed to deliver on 2 percent inflation.

Warsh declines to submit his own path

The dot plot contained only 18 submissions. Kevin Warsh later confirmed at his press conference that he was the policymaker who chose not to file a projection. The break from a practice that began in 2012 is consistent with his long-standing criticism of forward guidance. Warsh has argued it can lock policymakers into a rate path that economic data do not support. The only previous official to withhold a dot was former St. Louis Fed President James Bullard, who regularly omitted his longer-run neutral-rate estimate.

Trump says he is fine with whatever Warsh decides

Speaking to reporters in France, President Donald Trump said he no longer objects to rates staying on hold or rising, a sharp departure from his 18-month campaign to pressure former chair Jay Powell to cut. "It's hard to believe. It just keeps the country down and it's so, it's so, unusual. But we have a very good guy over there right now so I'm guided by what he wants," Trump said. He added that he wanted the Fed to be independent and not to look at him.

Inflation worry and the balance sheet

Inflation by the personal consumption expenditures price index is now seen at 3.6 percent by year-end, a level driven higher by the oil-price surge during the Iran war. Although a ceasefire deal has been announced, damage to energy facilities leaves the speed of the recovery in doubt. The policy statement reaffirmed the Fed will maintain ample reserves in the banking system, signalling continuity on balance-sheet policy. Warsh acknowledged he had heard from committee members that they "have some work to do on the price-stability front."

Labour market and task forces

Warsh described the three-to-six-month jobs trend as moving in a good direction, with the labour market broadly stable. He also announced he would set up internal task forces, saying the Fed was clear-eyed about its mission. He did not elaborate on their scope, but the move fits with his promise of a regime change in the central bank's communications and operating style.