The FOMC kept its rates unchanged at 3.50%-3.75% in an unanimous vote earlier today.
The dollar fell sharply (-0,4% vs. USD), as did the main US stock indices (S&P 500 down 0,5%), mainly owing to a particularly hawkish Dot Plot (Committee's projection of interest rates going forward).
Figure 1: FOMC Dot Plot (2026 - 2028+)
Source: FOMC, 17.06.2026
Figure 2: FOMC Dot Plot [June vs. March] (2026)
Source: FOMC, 17.06.2026
We have also seen a rather sharp revision upwards of the core PCE inflation (excluding food and energy), now expected to reach 3.6% this year.
Figure 3: Fed's Forecasts (2026 - 2028+)
Source: FOMC, 17.06.2026
The first Kevin Warsh's conference has not been all to dovish at first. Quite a lot of information was flying around, including the formation of the so-called "working groups", which will be working on "various changes". This abundance of news is not expected to be a regular occurence, however, with the Governor underlining that the Committee is dropping the forward guidance.
Dovish undertones started to become clear roughly midway through the conference. Warsh mentioned that the Fed's monetary policy position is uneven across economic sectors - restricting the housing market, but not the financial one. Furthermore, the Governor said that the Committee should "not feel bound by (its own - editor's note) rate projections" and that it often refers to "outdated data". He stays open for "new data sources", which seems rather troubling, particularly considering last year's firing of the BLS Commissioner, Erika McEntarfer.
The new Chair says to not believe in chosing between inflation and jobs. The Committee does, which the Dot Plot made particularly clear. The markets take their side, believing that Warsh's dovish bias is not particularly influential within the committee (at least for now).
US stock indices end the day down by over 0.5%, US Bond yields continue to increase (2Y by roughly 13 bp.), with dollar strengthening against every single G10 currency (EURUSD down 1%). The rise in yields has put considerable pressure on gold (-2.4%) and silver (-3.8%).
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Michał Jóźwiak, Financial Markets Analyst at XTB
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