FOMC Holds Rates Steady at 3.5%-3.75% in First Meeting Under New Chair Kevin Warsh

The Federal Reserve's Federal Open Market Committee voted unanimously to maintain the benchmark interest rate in a range of 3.5% to 3.75% at its June 2026 meeting — marking the fourth consecutive meeting with no change to the policy rate.

The decision comes amid a period of transition in leadership, with Kevin Warsh presiding over his first policy meeting as Chairman, succeeding Jerome Powell. The committee's statement indicated that economic activity is expanding at a "solid pace," though it cited elevated uncertainty partly due to the conflict in the Middle East and its impact on energy prices.

Leadership and Operational Changes

New Chairman Kevin Warsh

Kevin Warsh, who succeeded Jerome Powell as Federal Reserve Chair, announced several significant changes to the Fed's operations and communications during his first press conference on June 17, 2026. Warsh indicated he aims to adopt a governing approach similar to former Chair Alan Greenspan. Key changes include:

• Forward Guidance: Warsh dropped forward guidance from the FOMC statement, stating that it is "not well suited for the current policy conjuncture."
• Dot Plot Projections: Warsh chose not to submit his own rate projections and abstained from the "dot plot." Only 18 of 19 FOMC officials submitted projections for the June meeting.
• Task Forces: Warsh announced the establishment of five task forces to review Fed communications, balance sheet management, data sources, productivity and jobs, and inflation frameworks.
• Press Conferences: Warsh has not committed to holding press conferences after every policy meeting, stating the practice will be reviewed.
• FOMC Statement Length: The post-meeting statement was shortened to approximately 130 words, a reduction from over 300 words in recent meetings. Warsh stated the new format "dispenses with older language and provides only factual information."

Succession Context

Jerome Powell's term as Fed Chair concluded in May 2026. Powell had previously stated that the Supreme Court case concerning the attempted dismissal of Fed Governor Lisa Cook was "perhaps the most important legal case in the Fed's 113-year history." Powell retained the option to remain on the Fed's governing board for an additional two years. President Trump is expected to nominate a new Fed leader. Treasury Secretary Scott Bessent indicated an announcement could come "in the next week or so."

Policy Statement and Economic Projections

FOMC Statement Language

The FOMC stated that "economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East." The statement described productivity growth and capital investment as strong, noted that job gains have kept pace with the workforce, and stated the unemployment rate has changed little.

Summary of Economic Projections (SEP)

The June meeting included the first Summary of Economic Projections for 2026. The median forecast among FOMC officials indicated one rate cut for the year, consistent with the December 2025 projection.

Among the 18 officials who submitted projections for the federal funds rate at the end of 2026:

• 8 projected holding rates steady.
• 3 projected one rate hike.
• 5 projected two rate hikes.
• 1 projected four rate hikes.
• 1 projected a single rate cut.

Nine of 18 FOMC members projected at least one rate increase this year.

Dissenting Votes and Committee Divisions

January 2026 Meeting Dissent

At the January 2026 meeting, Governors Chris Waller and Stephen Miran dissented from the majority decision to hold rates steady, advocating for a quarter-percentage-point cut.

Wider Committee Divisions

Meeting minutes from the January 27-28, 2026 FOMC meeting revealed divided opinions among officials regarding the future path of interest rates. Some participants suggested further rate cuts would be appropriate if inflation declines, while others advocated for holding the policy rate steady for some time. A minority of officials considered the possibility of future rate hikes if inflation remains above target levels.

New voting regional presidents, notably Lorie Logan of Dallas and Beth Hammack of Cleveland, have publicly stated their belief that the Fed should maintain its current position, emphasizing inflation as a continuing threat.

Market Reaction

Following the announcement:

• Equity markets declined. The S&P 500 and Dow Jones Industrial Average remained largely flat, while the Nasdaq Composite saw a slight increase.
• Short-term interest rates rose.
• The 10-year Treasury yield rose marginally.

Traders fully priced in one quarter-point hike by year-end, according to available market data. Futures traders projected the next rate cut to occur in June, with another potentially following in September or October.

Economic Context

Inflation

Inflation remains above the Federal Reserve's 2% target. The Fed's preferred personal consumption expenditures (PCE) price metric has remained around 3%. Core inflation, excluding food and energy, was running at 3% as measured by the consumption expenditures price index. Fed Chair Jerome Powell stated that tariff-related inflation is expected to peak by mid-2026 and that the United States had not achieved desired progress on inflation.

Chicago Fed President Austan Goolsbee stated that a 3% inflation rate is "not good enough" and deviates from the Fed's 2% target, asserting that "stalling out at 3% is not a safe place."

Labor Market

The unemployment rate decreased to 4.3% in January 2026, and nonfarm payroll growth exceeded expectations in recent reports. Job growth has decreased over the past year, and the unemployment rate had previously risen to 4.4%. A report from the Conference Board indicated that job security concerns are impacting consumer confidence.

External Factors

The conflict in the Middle East has contributed to a global energy shock, pushing up oil prices and adding complexity to the economic outlook. The FOMC cited elevated uncertainty partly due to this conflict.

Federal Reserve Independence

President Trump has publicly advocated for more significant rate reductions by the central bank.

President Trump attempted to dismiss Fed Governor Lisa Cook, a move blocked by the Supreme Court, which is scheduled to hear arguments in Cook's case. President Trump also threatened to dismiss Fed Chair Jerome Powell. The Justice Department issued subpoenas to the central bank as part of an investigation into cost overruns at the Fed's headquarters.

Powell responded publicly, stating, "Public service sometimes requires standing firm in the face of threats," and that the issue is "whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation." Powell later stated, "We haven't lost it," regarding Fed independence, and expressed strong commitment to its preservation.

Stephen Miran, a White House economic adviser appointed by President Trump to a short-term vacancy on the Fed board, cast the sole vote for larger, half-point rate cuts at two preceding meetings.