Overview
- The Federal Open Market Committee voted unanimously to keep the federal funds rate at 3.50%–3.75% in Kevin Warsh’s first meeting, leaving policy unchanged for the fourth straight meeting.
- The Fed’s quarterly projections showed a shift toward tighter policy with nine officials now expecting at least one rate hike by year-end, altering market odds for 2026 moves.
- Warsh removed forward guidance, declined to submit his own rate forecast, and announced five task forces to review communications, the balance sheet, data sources, productivity and the inflation framework.
- Markets reacted with falling stocks and rising short-term Treasury yields as investors priced a higher chance of future hikes and lenders signaled upward pressure on borrowing costs and mortgages.
- Warsh’s changes mark a shift in Fed practice that responds to a recent jump in inflation driven in part by higher energy costs from the Iran conflict and sets up a six-week runway to reassess policy at the next meeting.