Fed Leaves Rates Unchanged in Warsh's First Meeting, Signals Possible 2026 Hike

Rate decision and Warsh's debut

The Federal Reserve kept its benchmark rate unchanged in a target range of 3.50% to 3.75% at the June 17 meeting, a decision taken unanimously by the 12 voting members. The vote, the first unanimous one in a year, marked the debut of Kevin Warsh as Fed chair.

“This committee will guarantee price stability in any institution.”

Warsh said he was "honored" to lead the Fed and emphasized the commitment to bringing inflation back to the 2% target.

A hawkish turn in the dot plot

The quarterly projections revealed a dramatic shift. Nine of 19 FOMC members said at least one rate increase was warranted before 2026 ends, up from zero in March. Six of those nine saw more than one quarter-point hike as necessary.

March 20260

June 20269

March 2026

0 members

June 2026

9 members

Data from the article text

The median estimate for the federal funds rate at end-2026 jumped to 3.8%, from 3.4% three months earlier. Eight members favored keeping rates stable for the rest of the year; only one supported a cut.

Economic forecasts: higher inflation, slightly softer growth

The Fed sharply lifted its inflation outlook for 2026, projecting headline PCE inflation at 3.6%, compared with a 2.7% estimate in March. Core inflation, which excludes food and energy, is seen at 3.3%.

“Persistently elevated prices place a burden on the American people, but this recent situation does not necessarily have to persist.”

GDP growth was revised down to 2.2% from 2.4%, while the unemployment forecast ticked lower to 4.3% from 4.4%. The statement noted that economic activity is expanding "at a sustained pace" despite uncertainty linked to the Middle East conflict, which has driven energy costs higher.

Communication revolution and task forces

Warsh immediately imposed a leaner communication style, releasing a statement of just four paragraphs, roughly 130 words, down from more than 300 in previous meetings. "The statement gives you the facts, in the best way we can evaluate them," he said. The new chair announced five task forces focusing on monetary policy communication, the balance sheet, data sources, productivity and employment, and inflation modeling. Warsh himself chose not to submit a rate forecast for the dot plot, calling it "not useful for the conduct of monetary policy." "There will be some family discussion," he added.

Market response and Trump's cautious blessing

Wall Street turned south after the release and Warsh's press conference, with the S&P 500 falling 1.21%, the Dow Jones losing 0.97%, and the Nasdaq dropping 1.34%. Treasury two-year yields climbed 11 basis points as futures traders priced in a hike by December.

At least one hike9

No change8

Cut1

At least one hike

9

No change

8

Cut

1

Data from the article text

President Donald Trump, on a visit to Europe, offered measured support.

“It's fine that the Fed left rates unchanged. Raising them would be hard to believe. It's a situation that slows down the country and is truly unusual, but now there is a very good person in charge, so I trust his decisions.”