Fed Holds Rates Under New Chair; Projections Turn More Hawkish

As anticipated, the Federal Open Market Committee maintained its interest rate target range at 3.50%–3.75% at its June meeting. In a change to its previous statement, the FOMC noted expanding economic activity, productivity growth and strong capital investment. Furthermore, the statement cited strong job gains as well as elevated inflation, attributable to supply shocks in industries including energy. At the same time, the committee reaffirmed its policy of maintaining ample reserves in the banking system. This statement marks the first unanimous decision since their June 2025 meeting.

In the press conference following the meeting, Federal Reserve Chairman Kevin Warsh said that economic activity continues to grow at a strong pace, with solid job gains and little change in the unemployment rate. Chairman Warsh noted that inflation remains elevated and reaffirmed the committee’s goal of price stability. This press conference was Warsh’s first as chairman, following his confirmation in May to serve as the 17th chairman in the institution’s history. The chairman noted a preference for limiting use of forward guidance, evidenced by the shorter statement and in his press conference answers.

The FOMC’s summary of economic projections, which maps out the Federal Reserve’s expectations for where interest rates may be headed in the future, signaled a more hawkish stance compared to the March summary. Nine Federal Reserve officials project there will be a rate hike in 2026, while eight anticipate no change in rates and one member projects a rate cut. Meanwhile, the projections show that officials still expect inflation to remain elevated, averaging 3.3% in 2026, higher than the 2.7% average projected in March. At the same time, the projections show officials expect real GDP to rise slightly less in 2026 than previously anticipated.