The Fed held rates for a fourth straight meeting.

In May 2026, Chair Powell stepped down and Kevin Warsh became the new Chair (confirmed by the Senate 54-45). Today, June 17, was his first meeting. The decision was a unanimous (12–0) hold. The Fed kept the fed funds target range at 3.50–3.75%, marking a fourth straight hold after January, March and April.

What the market was watching was not the rate itself, but the statement and the dot plot (more below). The statement was sharply shortened to about 130 words (down from 341 in April), and the language signaling an "easing bias" (cuts ahead) was removed. The dot plot, moreover, saw the outlook for rate cuts this year vanish and tilted toward hikes. The debate over "is the next move a cut, or a hike?" has clearly shifted toward a hike.

In response to post-pandemic inflation, the Fed hiked at a record pace from 2022. The fed funds rate peaked in July 2023 at 5.25–5.50% (midpoint 5.375%, a 22-year high). It then began cutting from September 2024, and a December 2025 cut brought it to 3.50–3.75%. But with inflation re-igniting, the Fed has now paused rate cuts and held steady.

In just a year and a half, the rate climbed from near zero to above 5%, then came back down to 3.625% — where it has now come to a stop. The last cut was in December 2025. Since then, the picture has been a textbook case of "higher for longer." The rate cuts markets had initially expected for 2026 have been pushed back.

The reason is a reversal in inflation. May CPI (consumer prices) jumped to +4.2% year on year, the highest since April 2023. Behind this is a double squeeze: upward price pressure from tariffs and higher energy costs tied to Middle East tensions. Core PCE — the gauge the Fed watches most closely — is also at +3.3%, far from the 2% target.

Meanwhile, the labor market remains resilient, with an unemployment rate of 4.3%. High prices but a healthy economy — this combination has led the Fed to conclude there is "no reason to rush a rate cut." Energy prices have surged +23.5% year on year, and whether they settle down is the biggest key going forward.

At four meetings a year, the FOMC publishes the dot plot — in which each member marks their rate outlook with a dot — alongside economic projections (SEP). This June, the dots shifted sharply hawkish. The rate cut for this year (one cut at the March median) is gone, and 9 of 18 members project a hike this year (six of them two). The inflation outlook was also revised up substantially.

Chair Warsh, long skeptical of the dot plot, did not submit his own dot. At the press conference he announced the creation of five task forces to review the conduct of monetary policy, communication, data, productivity and the drivers of inflation. In response to the hawkish dots, the market grew alert to a resumption of hikes, and all three major U.S. stock indexes fell together.

Monetary policy is set at the FOMC (Federal Open Market Committee), which meets eight times a year. Twelve people hold votes — the seven Governors in Washington, the President of the New York Fed (permanent), and four of the remaining eleven regional Fed presidents on a rotating basis. Decisions are by majority vote, and in recent years dissents have stood out.

The most recent April meeting split 8-to-4, with four dissents (the most since 1992). This June, by contrast, the vote was unanimous (12–0). Under new Chair Warsh, the committee has fallen into line on "reining in inflation." The statement going so far as to say it "will deliver price stability" also reflects that unity.

The FOMC meets eight times a year, and the March, June, September and December meetings publish economic projections (SEP) and the dot plot. With today's meeting now done, the next is July 28-29.

Decisions are announced at 2:00 p.m. U.S. Eastern Time, with the Chair's press conference 30 minutes later. The market is trying to gauge, at the July meeting and beyond, whether the effects of energy prices and tariffs ease and inflation slows, or whether prices stay high and a debate over resuming rate hikes emerges.

The dollar is the world's reserve currency. Fed rates move currencies, bonds and stocks worldwide. As long as U.S. rates stay high, a backdrop of a stronger dollar and weaker yen tends to persist, an important driver of dollar-yen. A look across the U.S., Europe and Japan reveals the "divergence" in global monetary policy.