June 2026 FOMC Reaction: A Hawkish Hold

The FOMC kept its target federal funds rate unchanged today, but signaled higher rates may be on the horizon.

Key points:

• The FOMC voted today to hold its target federal funds rate at 3.5% to 3.75%, the fourth consecutive meeting at which key rates remained unchanged. 
• The Committee’s messaging accompanying the decision took a significantly hawkish turn, with half of the committee members projecting rate hikes this year.

The Federal Open Markets Committee (FOMC) voted to keep its target federal funds rate unchanged for the fourth consecutive meeting, though the start to newly appointed Fed Chair Kevin Warsh’s term at the top of the Federal Reserve is anything but quiet. The unanimous decision comes on the heels of a surprisingly strong jobs report released earlier this month and an energy price shock that has driven inflation to its highest level since early 2023. With 9 FOMC members projecting rate hikes within the next year and significant changes made to the policy statement, the meeting represented a significant shift in Fed messaging. 

The FOMC’s primary concern at the moment appears to be inflation, not necessarily labor market health, which may mean hiking key interest rates in the future instead of cutting them.  Core inflation (which excludes more-volatile prices for food and energy), was high even before the recent surge in energy and energy-related costs, with price growth consistently staying above the Fed’s 2% target for half of a decade and counting. Now with the labor market showing signs of renewed momentum, Fed officials are signaling a willingness to more directly address the price stability side of their dual mandate. 

In the committee’s quarterly summary of economic projections, half of the respondents indicated they expect at least one rate hike this year, with some committee members projecting 2 or 3. Still, forecasts can shift quickly. Just three months ago, the (mostly) same committee was foreshadowing rate cuts. But officials left little ambiguity about their focus going forward, saying directly: “The Committee will deliver price stability.” Time will tell what monetary policy decisions will be needed to achieve that goal.