Will the June 17-18 FOMC hold rates at 3.50-3.75%?
Tracking the June 17-18 FOMC decision — the first under new Fed Chair Kevin Warsh (confirmation expected May 13). Polymarket and CME FedWatch both price near-certainty of no change. Tracks the post-April pause environment with Iran war, sluggish jobs, and resurgent inflation as cross-currents.
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The Takeby 2026-06-18
The June 17-18 FOMC meeting holds rates at 3.50-3.75% (no change)
Market
97%
Our Call
96%
Δ
-1
Why we agree
We hold 1 point below the market because Warsh's first meeting introduces a small additional uncertainty bucket — he could surprise by signaling intent differently than Powell's framework, though an actual rate move is extraordinarily unlikely.
What changes our mind
**Warsh's first public remarks as Chair-elect** (post May 13 confirmation) — language on FAIT (Flexible Average Inflation Targeting) and the dual mandate. A hawkish opening tone tightens the cut window.
All forecasts
02
Warsh's first SEP (dot plot) shows median expectation of ≤1 rate cut in 2026
By 2026-06-18
Market
78%
Our Call
74%
Δ
-4
Why we disagree
Warsh's public record skews hawkish on inflation. The March SEP showed 1 cut median for 2026. Inflation has firmed since March, supporting a more hawkish median under new leadership. Major surprise would be 2+ cuts (dovish) or zero cuts (very hawkish).
Why our call differs from market
Slightly below the prior because dot plots tend to converge toward expectations during regime changes; Warsh may not yet have full sway over individual FOMC members' projections at his first meeting.
03
First rate cut of 2026 occurs at the September FOMC meeting
By 2026-09-17
Market
32%
Our Call
28%
Δ
-4
Why we disagree
Current swap pricing suggests ~50% probability of any cut in 2026, with September being the most likely meeting if one occurs. Iran-war duration and CPI trajectory through Q3 are the swing variables. Without major data downside surprise, September cut probability is sub-50%.
Why our call differs from market
We're slightly below market because Warsh's leadership likely tilts toward 'higher for longer,' and the inflation re-acceleration argues against early cuts. September is plausible but not the base case.
The June 17-18 FOMC meeting is the first under new Fed Chair Kevin Warsh, confirmed to the Board on May 12 and expected to be confirmed as Chair on May 13.
Markets are pricing near-zero probability of a rate cut: Polymarket at 97% no-change, CME FedWatch implying roughly the same.
The April 29 meeting was the third consecutive pause, holding the funds rate at 3.50-3.75% as inflation re-accelerated and the Iran war added supply-side uncertainty.
Our pre-registered call: 96% no-change at the June meeting, reserving 4 points for tail-risk scenarios (surprise CPI deceleration, Iran shock, Warsh signaling).
We're 1 point below the market — modest calibration humility on a 'first meeting under a new Chair' contract.
May 12, 2026: Senate confirms Kevin Warsh to the Federal Reserve Board (51-45). Chair confirmation vote scheduled May 13. Powell's Chair term ends May 15. June FOMC will be Warsh's first meeting as Chair.
April 29, 2026: FOMC holds the federal funds rate at 3.50-3.75% — third consecutive pause. Powell explicitly ruled out reactive hiking to the Iran oil shock; Markets read this as a soft cap on hawkish surprise.
CME FedWatch (late March data): 89.2% probability of no change at June. More recent futures pricing implies near-zero rate-cut probability for the entire 2026 calendar year.
Polymarket: Fed-Decision-in-June contract trades at 98% no-change with $25M+ cumulative volume.
March 2026 CPI: 3.3% YoY headline, well above the 2% target. The reading effectively eliminates the case for a near-term cut.
Jobs market: Sluggish growth but no recession signal. Unemployment 4.1%, payrolls adding 105k/month (3-month average). Doesn't argue for emergency action either direction.
Warsh's first public remarks as Chair-elect (post May 13 confirmation) — language on FAIT (Flexible Average Inflation Targeting) and the dual mandate. A hawkish opening tone tightens the cut window.
May CPI release (mid-June, before FOMC) — the most market-moving data point. A surprise <3.0% reading would shift the 4% cut tail.
May employment report (early June) — payrolls below 50k or unemployment >4.5% would re-open dovish narrative.
Iran war oil price — sustained Brent above $90 keeps inflation expectations elevated; resolution under $75 gives cover for cut signaling.
Warsh's first dot plot — even more important than the rate decision itself. The Summary of Economic Projections (SEP) will signal his policy reaction function for the rest of 2026.
Surprise downside CPI shock (sub-3% headline) — opens a serious cut narrative but probability sub-15% given current inflation trajectory.
Iran oil de-escalation before June 17 — pulls inflation forward expectations down, gives Warsh political cover for a 25bp cut. Probability sub-20%.
Warsh signals aggressive cut intent in confirmation hearings or first speeches — would be a dramatic break from his historical hawkish profile. Probability sub-10%.
Acute financial-stability event between now and the meeting (bank failure, sovereign event) forcing emergency action. Probability sub-3%.
Surprise hike (raising rates) — would require dramatic CPI re-acceleration. Probability sub-2%.
Curve shape: Front-end is fully priced for no change; volatility around the meeting is largely in the dot plot, not the rate decision itself.
Dollar: Stable-rates-plus-Warsh-confirmed locks in the current DXY range. A cut surprise would weaken USD 1.5-2%; an aggressive hawkish SEP strengthens 1-2%.
Equities: Bigger market mover is Warsh's framing of the inflation fight. If he signals 'higher for longer is the policy,' growth equities underperform. If 'data-dependent' is the message, current levels hold.
Treasuries: 10-year yields are well above the curve's neutral assumption. A cut path would steepen materially; a hold + hawkish SEP keeps current inversion.
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