What happened at Kevin Warsh’s first Fed

Kevin Warsh’s first Federal Open Market Committee (FOMC) meeting as the new Fed chair ended with no change to interest rates and continued monetary policy. The vote was unanimous to hold the federal funds rate at a range of 3.50% to 3.75%, but the dot plot showed that more members of the committee believe rate hikes are on the horizon for 2026. And there was one dot missing from the chart: Warsh refrained from offering his own personal projections for interest rates.

While the rate hold was widely expected, markets still read the statement and Summary of Economic Projection (SEP) as hawkish after the Fed dropped easing-leaning forward guidance, aligning with Warsh’s preference to reduce projections and stay data-dependent. And for 2026, the inflation side of the Fed’s remit has run a bit hot. The latest Consumer Price Index (CPI) report showed year-over-year inflation was up 4.2% in May, primarily driven by rising energy, oil and gas prices that began in March with the onset of the Iran conflict. However, the core CPI, which removes volatile food and energy prices, was up 2.9% in May year-over-year and 0.2% month-over-month. That’s still higher since last year but down month to month from April’s reading, signaling that elevated inflation could be short-lived if the conflict in Iran and energy, oil and gas prices recede.

“The Kevin Warsh era has begun, and this is a committee that is making an explicit intention to promote inflation-fighting credibility,” J.P. Morgan Wealth Management Chief Investment Strategist Phil Camporeale said. “While both the FOMC and investors are divided on whether there will be a rate hike in 2026, we continue to believe the one-time supply shock from oil prices that drove up inflation in the spring will gradually dissipate in coming months, leaving the Fed on hold for the remainder of the year.”

So, what does this mean for investors and the rest of 2026? With a new Fed chair who has signaled broad reforms like lighter regulation, less guidance and a smaller balance sheet, there are three key takeaways to consider: what the dot plot showed, what was said in the policy statement and how Warsh handled his first press conference.

Key takeaway 1: Dot plot showed more policymakers expect higher rates in 2026 and 2027, but Warsh did not participate

The FOMC released a new Summary of Economic Projections, which included a new dot plot chart that shows where each Fed official stands on the future of interest rates.

These projections are not promises; they are simply individual forecasts based on each member’s view of inflation, unemployment and growth at that moment. If the economy changes, the projections can change, too.

Two key points stood out from the dot plot:

June's dot plot showed the median expectation for rates in 2026 moving higher. It implies the committee is less inclined to cut soon, with the balance of risks tilted toward hikes.

Here are policymakers’ median expectations of where the fed funds rate will be over the next few years:

The longer-run dot is often treated as a guidepost for the rate policymakers consider neutral, not a hard line.

The main message from the June dot plot: The Fed is in no rush to cut interest rates, and they may remain elevated through the end of 2027.

Key takeaway 2: The Fed’s policy statement was shorter, with less forward guidance and a focus on price stability

While the Fed’s policy statement was shorter and contained less forward guidance, the closing sentence was clear: “The committee will deliver price stability.” The Fed acknowledged that economic activity is expanding at a solid pace, but it understands that higher inflation is still impacting Americans.

The Fed has two main jobs: keep prices stable and support maximum employment. Right now, the Fed is focused on the former more than the latter. Policymakers feel good about the labor market, but inflation is still higher than the Fed’s 2% target.

Steady hiring and low unemployment give the Fed some room to wait and see how inflation progresses. Employers added 172,000 jobs in May, and the unemployment rate held at 4.3%, staying in the narrow 4.3% to 4.5% range it’s been in since last summer. The picture isn’t perfect, with wages lagging inflation and long-term unemployment trending higher. However, there aren’t any red alerts that would compel the Fed to cut interest rates to support the labor market.

That also helps explain why the Fed held steady instead of hiking right away. Higher rates can help fight inflation, but they can also slow hiring and spending. If inflation is mainly coming from energy, rate hikes may not fix the source of the problem.

Warsh has been clear that the Fed must take inflation seriously. And he made it clear at the press conference that he plans to tackle the inflation situation with the help of a new task force.

Key takeaway 3: Warsh’s first press conference as chair was shorter, with less forward guidance

Warsh’s first post-meeting press conference was shorter than past press conferences, and it indicated a shift in tone from his predecessor Jerome Powell. Given Warsh’s public comments criticizing the Fed for overcommunicating, it wasn’t certain the new chair would even stand for a press conference. Powell used the post-meeting discussion as a regular tool to manage expectations, guiding market-driven interest rates in between policy rate changes. Warsh signaled a change in course.

In his 10-minute speech, Warsh focused on the current interest rate policy, the dot plot and his lack of participation, and the announcement of five new task forces that will take on reviewing and reassessing Fed communications, balance sheet policy, data sources, productivity and jobs, and the inflation framework. Warsh then answered questions, just like his predecessors, showing that his goal of less post-meeting communication may take time to implement.

When is the next Fed meeting? And what can investors watch for?

The next Fed meeting is July 28–29. While that’s only about six weeks away, there will be a lot for investors to watch.

The Fed will likely be monitoring three things closely.

Iran and energy prices

Global oil prices fell this week to their lowest level since March following the news of a deal between the U.S. and Iran. That could provide quick relief for households and businesses if it flows through to the gas pump. While we expect negotiations to stay on a path of de-escalation, it could take time for global trade to normalize. The Fed will be watching for signals of how quickly energy and broader supply costs normalize. We may see how energy, oil and gas prices change after this news in the next CPI report, which will be released on July 14, and in the next Producer Price Index (PPI) report, which comes out July 15.

Inflation expectations

If people and businesses start to expect higher inflation, that can make inflation harder to control because workers may ask for higher pay and businesses may raise prices ahead of expected cost increases. We’ll see what people and businesses think in the New York Fed’s next survey of consumer expectations on July 7.

The labor market

If unemployment stays stable and hiring continues, the Fed has more room to stay on hold or even raise interest rates. A sharper rise in layoffs with inflation above target could add even more complexity to the next policy decision. The June jobs report will be released on July 2.

For investors, the Fed’s decisions affect different parts of a portfolio in different ways. Higher rates can increase yields, pressure longer-duration bonds and challenge interest-rate-sensitive sectors of the stock market. Inflation can also change the trade-off between income, growth and protection. The practical move is to stay diversified and focused on long-term investment goals.

The bottom line

Kevin Warsh’s first Fed meeting as chair was less about a rate move and more about his leadership and the message around the path forward. The Fed held rates steady because inflation is still elevated, and it was clear in the policy statement and Warsh’s press conference that price stability is the committee’s current focus. Economic activity is steadily expanding, and the unemployment rate hasn’t changed much over the last year, so taming inflation is the current focal point for the Fed under its new leadership.

The June dot plot confirmed that policymakers project interest rates to remain where they are or increase by 2027. And even though Warsh refrained from offering his own projections, the dot plot confirmed that even one rate cut in 2026 is not the base case it once was.

While we wait for economic indicators that can help determine the Fed’s next move, investors can stay focused on their investment strategy, sticking to the fundamentals like diversification and rebalancing portfolios to ensure they align with goals.

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