The US Federal Reserve kept its benchmark interest rate unchanged at 3.50%-3.75% at its latest policy meeting, but projections from policymakers showed increasing support for a rate hike before the end of 2026 as inflation remains above target.
The decision marked the first policy meeting chaired by Kevin Warsh, who succeeded Jerome Powell last month and immediately signalled a shift in the central bank’s approach to communication and policy-making.
While the Federal Open Market Committee unanimously opted to maintain rates, nine of the 19 policymakers projected at least one rate increase by year-end, reflecting concerns over persistent inflationary pressures.
The Fed also revised its inflation forecast for 2026 to 3.6%, up from 2.7% projected previously, although price growth is expected to ease to 2.3% in 2027. Economic growth projections were trimmed slightly, while the unemployment rate is now expected to end the year at 4.3%.
Warsh’s debut meeting featured a significantly shorter policy statement that abandoned explicit forward guidance, a move analysts said resembles the communication style adopted during former Fed chairman Alan Greenspan’s tenure.
Speaking after the meeting, Warsh said forward guidance was not well suited to the current environment and declined to provide indications on the direction of future policy.
“I can’t give you any forward guidance about what we’re going to do next. The good news is we’ll be meeting in six weeks,” he said.
Warsh also announced a broad review of the central bank’s operations, covering areas including communications, balance sheet management, data sources, productivity, employment and the inflation framework.
The review signals potentially significant changes to how the Fed conducts monetary policy and interacts with markets.
Financial markets interpreted the meeting as hawkish, with investors increasing bets that the Fed’s next move could be a rate increase as early as September.
The policy rate has remained at 3.50%-3.75% since December last year. Despite US President Donald Trump’s calls for lower borrowing costs, the latest projections suggest any easing under Warsh is unlikely to materialise in the near term.
The Fed reiterated its commitment to restoring inflation to its long-term 2% target, while acknowledging that elevated prices have partly been driven by supply disruptions and higher energy costs.
