Fed holds rates steady at 3.5‑3.75% as new chair Warsh takes helm

The Federal Open Market Committee left the federal funds target range unchanged at 3.5‑3.75% on Wednesday, marking the first rate decision under new Chair Kevin Warsh and reinforcing market expectations for a hold【3】.

Rate outlook and market calm

The decision aligns with the prevailing view that the Fed will keep policy “relatively high” to temper inflation, which peaked at 4.2% in May—the highest reading since 2023【2】. Analysts had priced in a near‑certain hold, with CME FedWatch showing a 99.6% probability of no change and virtually no chance of a cut【2】. The unchanged range also matches the fourth consecutive meeting where the target has been held steady, according to Trading Economics’ forecast for June 2026【3】.

Because the outcome was widely priced in, equity futures were largely flat on the morning of the announcement, with the Nasdaq edging higher on modest optimism about tech earnings【2】. Commodities showed limited movement; crude oil slipped half a percent, while gold and silver barely budged, reflecting the market’s focus on the policy signal rather than immediate supply‑demand shifts【2】.

Warsh’s debut and forward guidance expectations

Warsh’s first press conference will be the first major test of his communication style. While he has signaled a desire to avoid “over‑communication,” analysts expect him to minimize surprises and to signal any shift in the Fed’s “dual mandate” focus【4】. Barclays’ chief U.S. economist Marc Giannoni noted uncertainty around Warsh’s answers, suggesting that the market will watch the press conference for clues on future rate paths rather than expect an immediate policy change【4】.

The Fed’s updated “dot plot” and accompanying projections, due later on Wednesday, are also in focus. Historically, the Fed had projected one rate cut in 2026 and another in 2027, but market expectations have moved more hawkish since Warsh’s appointment, which was initially seen as dovish【3】.

What to watch

• June 28 FOMC minutes – will reveal how the committee interpreted the latest inflation data and labor market strength.
• July 1 Core CPI – a key gauge for assessing whether price pressures are easing enough to justify future cuts.
• Fed’s dot plot release – any shift in the median projection could reshape expectations for rate moves in 2027.

The hold underscores the Fed’s balancing act: keeping borrowing costs high enough to curb inflation while avoiding a sharp slowdown in employment. Warsh’s next moves, especially his communication strategy and any forward guidance, will determine whether markets view the policy stance as a temporary pause or the start of a more sustained tightening cycle.