Warsh's first Fed meeting: rates hold, and hikes are back on the table

The Federal Reserve kept its benchmark interest rate unchanged at Wednesday's policy meeting, the first chaired by Kevin Warsh since he took the helm of the central bank. The decision was unanimous, but the accompanying projections sent a clear hawkish signal: the Fed's next move may well be upward, not downward.

A Unanimous Hold, a Divided Outlook

Policymakers voted 12-0 to leave the federal funds rate steady at 3.5 to 3.75 percent. The Fed left its benchmark interest rates unchanged and signaled its next move could be a rate increase, in the first rate decision under new chairman Kevin Warsh. The hold itself was widely expected. The surprise came from the updated Summary of Economic Projections.

The updated dot plot reflects a hawkish pivot, with a 3.8 percent median rate projection for 2026, signaling fewer expected rate cuts. That is a meaningful shift from March, when updated forecasts suggested committee members expected to raise rates by a quarter percentage point this year, a turnaround from three months ago when the average member was projecting a quarter-point cut in 2026. Notably, there was one member who did not submit a projection, which is assumed to be Warsh, who has generally been skeptical of forward guidance.

Inflation Driving the Hawkish Shift

The driver behind the revised projections is persistent inflation, amplified by energy prices. For headline PCE inflation, officials raised the median forecast for 2026 to 3.6 percent, significantly higher than the 2.7 percent projected in March. The Fed sees the pressure spreading to core inflation, a sign the central bank no longer views this as an energy shock alone. Core PCE was lifted to 3.3 percent from 2.7 percent for 2026.

President Trump had nominated Warsh in hopes he would push for lower interest rates, but a wartime spike in energy prices has pushed rate cuts off the table for now. At his press conference, Warsh reiterated that the Fed is committed to bringing inflation back down to 2 percent, a level it has not reached for half a decade.

Stocks fell and short-term rates jumped as investors reacted to several Fed officials penciling in a rate hike for 2026. Warsh also announced five internal task forces to review Fed communications, its balance sheet, and other operations, which helped the major averages cut their losses as he detailed the upcoming changes.

Sources:
CNBC: Fed meeting live updates, June 17, 2026
NPR: 3 things to know about the new Fed chief's first meeting
Benzinga: Fed Holds Steady at 3.50-3.75 percent, June 2026