US Federal Reserve holds rates steady under new chair Warsh
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- The Federal Reserve unanimously held interest rates at 3.5-3.75% in Kevin Warsh's first policy meeting since he replaced Jerome Powell as chair last month.
- US inflation hit 4.2%, a three-year high, driven by energy prices that surged 23.5% in May amid the US-Israel war with Iran and the Strait of Hormuz closure.
- Kevin Warsh announced the Fed will drop forward guidance on monetary policy and launch five new task forces covering productivity, jobs, and inflation.
- Donald Trump publicly praised Warsh but stressed "there's no reason to raise rates," while Warsh pledged the FOMC is "unambiguous and unanimous" on delivering price stability.
- CME FedWatch forecasts a roughly 30% probability of rate hikes by September and more than 50% by December, while Goldman Sachs projects no rate cuts until mid- to late 2027.
- US markets remained flat on the decision, with the Nasdaq even at the open, the Dow up 0.05%, and the S&P 500 down 0.1% in midday trading.
Why it matters: Trump's public opposition to rate increases — and his earlier demand that any Fed chair agree on cuts — tested Warsh's independence on day one. Warsh answered with a unanimous hold and explicit "price stability" language, then dropped forward guidance to give the Fed more room against the Iran war's energy shock. Goldman Sachs projects no rate cuts until mid- to late 2027.
