Fed Holds Rates Steady Under Warsh

The Federal Open Market Committee (FOMC) voted unanimously on June 17, 2026, to maintain its benchmark overnight borrowing rate within the range of 3.5% to 3.75%. This decision marked Chairman Kevin Warsh's first policy meeting as chair, with markets closely watching for signals on interest rates and the central bank's balance sheet.

Warsh, nominated by President Trump in late January and confirmed in April, has indicated a preference for a neutral approach due to challenging economic times. Rising inflation, which surged to 4.2%—its highest level in more than three years—has made it difficult for the Fed to cut interest rates anytime soon. Hiring has improved noticeably since the beginning of 2024, removing a key rationale for rate cuts.

The 19 policymakers on the Fed’s rate-setting committee are split on whether an increase in the Fed’s key rate will be needed or if it can stay unchanged. According to Reuters and CNBC, nine of the 18 Fed officials projected that the federal funds rate would end 2026 above its current range of 3.5% to 3.75%. The median projection calls for the federal funds rate to end 2026 at 3.8%, up from 3.4% in the Fed's March summary.

Warsh declined to share his forecast in the dot plot, signaling a desire for less forward guidance. 'I did not submit a dot for me. It's not helpful in the conduct of policy,' Warsh said at a news conference following the decision, as reported by CNBC and Reuters. He also announced plans to form a task force to overhaul major Fed operations.

At his confirmation hearing in April, Warsh stated that Fed asset purchases have enmeshed the central bank in politics and policy decisions that should be the province of elected officials. He indicated he would consider cutting rates but acknowledged that with the current inflation rate roughly double the Federal Reserve's 2% long-term target, the central bank may be more likely to consider hiking rates.

Warsh is expected to hold his first press conference on Wednesday, where economists anticipate pivotal statements regarding monetary policy. According to CNBC, most Fed watchers on Wall Street expect new Chair Kevin Warsh won't participate in the dot plot, either because he feels he's not ready after having only been in office since May 22 or simply because he doesn't like the dot plot and its implications for forward guidance.

Tumbling crude prices on news that Iranian fuel may soon hit global markets promised inflation relief and pushed bond yields lower on Wednesday, while stocks and currencies were quieter ahead of Kevin Warsh's debut meeting as Federal Reserve chair. Brent crude futures dived below $80 to the lowest since the opening salvos of the U.S.-Iran conflict in March.

A senior U.S. official said the U.S. will waive sanctions on Iranian oil, under the deal to end the war, raising the prospect of millions of additional barrels of supply. U.S. bond yields dipped and rates in Asia followed suit, with 10-year Japanese yields down 1.5 basis points to 2.63% and 10-year Australian rates down almost 5 bps to 4.787%.

Traders are waiting to see how Warsh walks the line between his dovish president and markets, which expect a hike this year, and the anticipation has broadly held the dollar in stasis. The euro firmed only a little this week, to hover around $1.16.