WASHINGTON, June 17, 2026, 18:12 (EDT)
- The Fed kept the benchmark rate steady at 3.50%-3.75%. Fresh projections now show policymakers are leaning toward a hike in 2026.
- Warsh left out his own dot and launched a review of how the Fed talks to markets, the quarterly forecast chart included.
- Stocks dropped and yields on short Treasuries climbed, with traders betting on tighter policy.
The Federal Reserve left rates steady Wednesday, holding the federal funds target at 3.50%-3.75%. It was Kevin Warsh’s first policy meeting as chair, and the changes were obvious—a briefer statement, no sign of an easing bias and a fresh rate outlook pointing to higher rates this year. The vote to keep rates unchanged was unanimous.
Investors were watching to see if Warsh, picked by President Donald Trump after he pushed for lower rates, would move the Fed toward rate cuts. But the Fed’s updated projections showed half of its policymakers now see at least one rate hike in 2026, and just one expects a cut.
Stocks slid after the meeting. The Dow gave up 0.98%, S&P 500 lost 1.21%, and the Nasdaq dropped 1.34%. All 11 S&P sectors ended down. Regional banks and homebuilders took the biggest hit, pressured by rising funding and mortgage costs.
The Fed’s latest “dot plot” now puts the median federal funds rate at 3.8% for 2026, higher than the 3.4% projection in March. Officials also lifted their estimate for 2026 PCE inflation, the Fed’s preferred price measure, to 3.6% from 2.7%. Core PCE inflation was bumped up too, to 3.3%. Federal Reserve
Warsh didn’t enter a rate forecast. He said he pressed colleagues to keep filing projections, but didn’t do one himself. That’s in line with his ongoing criticism of the Summary of Economic Projections. Reuters said the new dot plot showed 18 entries, not all 19.
The statement was sparse. It noted economic activity is expanding solidly, job growth is keeping up with the labor force, and inflation is still over the Fed’s 2% target, in part from energy supply shocks out of the Middle East conflict. The Fed wrapped with a straightforward line: “The Committee will deliver price stability.” Federal Reserve
Warsh set up five new task forces on Fed communications, balance-sheet policy, data use, productivity and jobs, and inflation frameworks. He told reporters the groups will pose “hard questions” and look at possible changes to what the Fed does now. Reuters said Warsh wants early feedback by the fall, with most of the work wrapped up by year-end. Federal Reserve
Bond traders saw the package as hawkish. The two-year Treasury yield, seen as the best barometer for Fed rate bets, jumped 16 basis points to 4.207%, its highest since February 2025. Rate markets priced in a 72% chance of a hike by October.
“This Fed decision was short, but not sweet,” Karl Schamotta, chief market strategist at Corpay, told Reuters. Schamotta said Warsh had stripped out most of the language traders usually watch for hints. Tom Graff, chief investment officer at Facet, said there had “clearly been a big shift” even though the rate stayed where it was. Reuters
Dollar rose and gold turned lower after Fed put out new projections. Spot gold fell 0.7% to $4,299.89 an ounce at 2:40 p.m. EDT. Dollar strength made gold pricier for buyers outside the US. “A new Fed,” said Tai Wong, independent metals trader, adding Warsh didn’t push back much against the hawkish tone. Reuters
The move pushes the Fed toward a tighter global rate setup. Reuters said the Bank of Japan lifted rates Tuesday to the highest since 1993. The Bank of England is set to meet Thursday; no shift in policy is likely, but inflation is still a focus.
The dots might be overstating the Fed’s next moves. Oil prices slipped from this year’s highs after word of an early U.S.-Iran agreement. Some investors think cheaper energy might keep inflation in check, letting the Fed skip more hikes. “The path is narrow,” said Kay Haigh, global head of fixed income and liquidity solutions at Goldman Sachs Asset Management, telling Reuters the Fed could hold steady. Reuters
Trump didn’t say much. In France, he was asked about the Fed keeping rates on hold and said, “It’s all right. Whatever.” He said Warsh was his guide but still called a rate hike hard to believe. Reuters
