FX.co ★ Fed Leaves Rates Steady

The Federal Reserve left the federal funds rate unchanged at 3.50%–3.75% for a fourth consecutive meeting in June 2026, in line with market expectations. This was the first policy meeting chaired by the new Fed Chair, Kevin Warsh.

The latest Summary of Economic Projections showed a divided FOMC. Nine officials projected at least one 25-basis-point rate increase this year, with six of them anticipating at least two hikes. Another nine officials expected either no change or a rate cut. Only 18 of the 19 participants submitted rate projections for the end of 2026, implying that the new Chair did not provide a forecast, as had been widely anticipated.

Growth projections were slightly softer for the near term. Real GDP growth for 2026 was revised down to 2.2% from 2.4% in March, while the 2027 forecast was left unchanged at 2.7%. In contrast, inflation projections moved higher. The PCE inflation forecast for this year was raised sharply to 3.6% from 2.7%, and the 2027 projection was nudged up to 2.3% from 2.2%.

Policymakers noted that economic activity continues to expand at a solid pace despite elevated uncertainty, and job gains are broadly keeping up with labor force growth. However, inflation remains above the Fed’s 2% target, partly due to ongoing supply-side shocks.