June 2026 FOMC Update

The Federal Reserve (Fed) left its target policy rate unchanged today at a range of 3.50%–3.75%. The vote was unanimous at 12–0. The policy statement was unusually brief and contained no guidance on the direction of future policy. Chair Warsh confirmed that the Committee’s intent was to produce a short, simple statement and to dispense with some of the Fed’s older language. Today’s statement was reduced from 345 words in April to 132 words. The Committee reaffirmed its policy of maintaining ample reserves in the banking system. Multiple references were made within the official statement and during the press conference to the Fed’s unambiguous and unanimous commitment to restoring price stability.

Current conditions

Economic activity has been expanding at a solid pace. Productivity growth and capital investment are strong. Inflation remains elevated compared to the Committee’s 2% objective, partly reflecting supply shocks from energy price increases. Job gains have kept pace with the workforce, and the unemployment rate has been relatively steady.

Forward guidance

There was an update to the Fed’s Summary of Economic Projections (SEP) at today’s meeting, but Warsh did not submit his own projections. He also did not submit a dot plot, in line with his preference for less forward guidance on the path of interest rates. The median 2026 rate projection (excluding Warsh) increased to 3.75% from 3.375% in March, with 9 of 18 officials projecting a hike by year-end. Also noteworthy was a 0.50% increase in the median rate projection by the end of 2027, to 3.625%.

Policy/Market reaction

Bond yields were little changed before the meeting, but short-term Treasury yields have risen meaningfully since the release. Equities were hovering around either side of unchanged before the release and are weaker since the end of Warsh’s press conference. Warsh is appointing task forces to review five areas of monetary policy: communications, balance sheet, data sources, productivity and jobs, and the inflation framework. There is broad agreement within the Committee for a review designed to improve the Fed and ensure its credibility.