# Fed Rate Warning for 2026

**Published:** 2026-06-30T17:03:54.966Z  
**Topic:** Fed Rates  
**Sentiment:** neutral  
**Publisher:** TrendWatcher — https://www.trendwatcher.in/article/4abd72b1-8d19-4146-a7cf-221a56c3222e

Top economist Greg Daco warns the Fed may hold rates steady despite inflation, with supply-driven pressures and fragile economy, 4.1% inflation rate and 3.4%

1. EY-Parthenon Chief Economist Greg Daco believes the Fed is likely to keep rates on hold, as the inflation problem has changed, with the May PCE report showing headline inflation rising 4.1% from a year earlier and core PCE climbing 3.4% [1]. This comes as the Fed's June 17 meeting saw nine of 19 policymakers forecast at least one rate hike by year-end, while the central bank kept rates unchanged at 3.50%-3.75% [1].

| At a glance | |
|---|---|
| Inflation Rate | 4.1% |
| Core PCE | 3.4% |
| Fed Rate | 3.50%-3.75% |
| Expected Rate Hike | 77% odds of a quarter-point hike by year-end |

## What drove the move
The shift in the Fed's stance began at the June 17 meeting, with a hawkish turn from the prior meeting, when no policymaker had penciled in a hike [1]. The inflation debate was further fueled by the May PCE report, which showed headline inflation rising 4.1% from a year earlier and core PCE climbing 3.4% [1]. Daco argues that the current inflationary pressures facing the Fed are not primarily driven by overheated demand, but rather by supply pressures, such as higher energy prices and the strain of AI on limited resources [1].

## The competitive picture
The consensus among experts is still for a long hold, with now a louder minority warning that hikes are back on the table [1]. According to a Reuters poll, more than three-quarters of economists expect the Fed to keep rates unchanged at 3.50% to 3.75% through the rest of 2026 [1]. However, some contrarian views, such as those from Andrew Hollenhorst, chief U.S. economist at Citi Research, suggest that the economy may require rate cuts instead of hikes [2].

## What to watch
* The next Fed meeting and potential rate decision
* The June jobs report and its impact on the labor market
* The core consumer price index, expected to cool to an annual rate below 2.5% by August

The real significance of Daco's warning lies in the potential for the Fed to hold rates steady despite inflation, highlighting the complexity of the current economic landscape and the challenges faced by policymakers. As the economy continues to evolve, it remains to be seen how the Fed will balance its dual mandate of maximum employment and price stability.

## Sources
1. TheStreet — [Top economist delivers blunt Fed rate warning for 2026](https://www.thestreet.com/fed/top-economist-delivers-blunt-fed-rate-warning-for-2026)
2. Fortune — [The contrarian view for Fed rate cuts: Payrolls will weaken, inflation will plunge, and Kevin Warsh was 'largely performative' in his hawkishness | Fortune](https://fortune.com/2026/06/27/fed-rate-cuts-payrolls-unemployment-inflation-gdp-oil-prices-kevin-warsh/)

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Cite as: TrendWatcher, "Fed Rate Warning for 2026", https://www.trendwatcher.in/article/4abd72b1-8d19-4146-a7cf-221a56c3222e