Why the Warsh Fed sees interest rate hikes ahead

• The Federal funds rate target is in a holding pattern, but the committee has a strong inclination for the next move to be higher.
• PCE inflation rate forecast for December 2026 was raised from 2.7% (March) to 3.6% (June).
• Forecasted annual change in real GDP for December 2026 was slightly lowered from 2.4% (March) to 2.2% (June).
• Economic activity is expanding at a solid pace despite elevated uncertainty, partly due to the conflict in the Middle East.

Federal Reserve Chairman Kevin Warsh outlined the committee's economic outlook, indicating a holding pattern for interest rates but a strong inclination for future hikes. Inflation forecasts for December 2026 were significantly raised, while real GDP growth projections were slightly lowered, with the Middle East conflict cited as a source of uncertainty.