The Federal Reserve kept its benchmark interest rate unchanged at 3.5% to 3.75% following its June 17 FOMC meeting, a unanimous 12-0 decision that landed exactly where most market participants expected. What they didn’t expect was the tone.
The accompanying statement leaned notably hawkish, emphasizing that inflation remains elevated above the Fed’s 2% target and pointing to energy supply shocks as a persistent headwind.
A new chair, the same old inflation problem
Warsh, who succeeded Jerome Powell, brought a different energy to the post-meeting statement. The language described economic activity as “solid,” highlighted strong productivity growth, and noted stable unemployment rates.
Futures markets absorbed the message quickly. Following the statement, pricing indicated roughly a 66% chance of at least one rate hike during 2026. That’s a meaningful shift from the rate-cut hopes that had been baked into earlier forecasts.
