Federal Reserve leaves interest rates unchanged as Warsh era begins

• Half of the 18 FOMC voting members (nine) project at least one rate hike before year-end 2026, with six forecasting two 25-basis-point increases
• Policymakers expect core PCE inflation at 3.6% by end of 2026, well above the Fed's 2% target, with unemployment at 4.3% and GDP growth at 2.2%
• The decision marks the fourth consecutive rate hold in 2026 (January, March, April, June) after three 25-basis-point cuts in September, October and December 2025

Federal Reserve Holds Rates Steady in Warsh's First FOMC Decision

The Federal Reserve kept interest rates unchanged at 3.5%-3.75% on Wednesday, marking the first policy decision under new Chair Kevin Warsh. The unanimous 12-0 vote by the Federal Open Market Committee (FOMC) extends the central bank's pause following rate holds in January, March, and April 2026.

Key Policy Context:

The decision follows three consecutive 25-basis-point rate cuts in September, October, and December of the previous year. The Fed cited elevated inflation concerns, driven partly by supply shocks from the ongoing conflict in Iran that have increased energy prices.

Economic Projections:

The FOMC's June "dot plot" reveals a hawkish tilt among policymakers:

• Nine of 18 voting members anticipate a rate hike before year-end 2026
• Six members project two 25-basis-point increases
• Core PCE inflation forecast at 3.6% by end-2026, well above the 2% target
• Unemployment rate projected at 4.3%
• Real GDP growth estimated at 2.2%

Economic Assessment:

The Fed noted that economic activity continues expanding at a "solid pace" despite elevated uncertainty from Middle East tensions. Job gains are keeping pace with workforce growth, supporting the Fed's dual mandate of price stability and maximum employment.

Market Implications:

The hawkish projections suggest potential policy tightening ahead if inflation remains persistent. Chair Warsh's first press conference at 2:30 p.m. ET will be closely watched for guidance on the policy path forward. Former Chair Jerome Powell remains on the Board of Governors as a voting FOMC member, providing continuity during the leadership transition.