US Federal Reserve Holds Rates at 3.50%–3.75% in Warsh's First Meeting; Dot Plot Flips Hawkish to Signal a 2026 Hike

The US Federal Reserve concluded the fourth FOMC meeting of 2026 on June 17 by holding the federal funds rate steady in its 3.50%–3.75% target range, where it has remained since December 2025. The decision was unanimous at 12-0 and marked the first meeting chaired by Kevin Warsh, who succeeded Jerome Powell. While the rate hold itself was fully priced in by markets, the projections released alongside the decision delivered a decidedly hawkish surprise.

The FOMC's updated Summary of Economic Projections — the closely watched 'dot plot' — showed the median policymaker now expects the federal funds rate to end 2026 at approximately 3.8%, a sharp upward revision from the 3.4% median projected in March. That shift implies the committee now sees at least one 25-basis-point rate hike as likely this year, a reversal from the prior expectation of a cut. Of the 18 officials submitting projections, nine anticipated at least one hike before year end, with six projecting two hikes; eight expected no change, and only one foresaw a cut. The most hawkish official judged the appropriate year-end rate near 4.5%.

The driving force is inflation. The Fed sharply raised its year-end PCE inflation forecast to 3.6%, up from 2.7% in March, acknowledging that price pressures stemming from the conflict in the Middle East have proven stickier than anticipated. The committee's statement noted that economic activity is expanding at a solid pace despite elevated uncertainty tied 'in part' to the Middle East conflict, with strong productivity growth, robust capital investment, and an unemployment rate near 4.3% that has changed little.

In his first press conference as Chair, Warsh emphasized that the committee had streamlined its statement, removing older forward-guidance language that previously signaled a bias toward future cuts. That removal had drawn three dissents at the April meeting; the cleaner June statement won unanimous approval. The defining tension of the day, analysts noted, was a committee unanimous on holding but increasingly divided and hawkish on the path ahead — with any rate reductions now pushed into 2027 and 2028.