The Federal Reserve held its target range for the federal funds rate at 3.50 to 3.75 per cent on Wednesday in the first meeting chaired by Kevin Warsh, with the Federal Open Market Committee voting unanimously 12-0 to keep policy on hold. New economic projections showed nine of the 19 policymakers around the table expected at least one rate hike by the end of 2026.
Warsh, sworn in as Chair on 22 May 2026, used the meeting to signal a change in communication style, dropping the forward guidance language on future rate moves that had featured in recent statements.
UNANIMOUS HOLD AND HAWKISH DOTS
The 12-0 vote leaves the target range unchanged at 3.50 to 3.75 per cent and gives Warsh a united committee at his opening decision. Unanimity at a first meeting under a new Chair is common but not guaranteed, and its presence here suggests broad support for holding through this decision even amid divergent views on the path ahead.
The Summary of Economic Projections told a more hawkish story. Nine of 19 policymakers indicated they anticipated a rate hike by the end of 2026, splitting the committee down the middle on whether tightening will be needed before the year is out. The distribution of projections is closely watched by markets as an indication of where the centre of gravity of the committee sits.
The Committee reaffirmed its policy of maintaining ample reserves in the banking system, keeping intact the operating framework that has guided balance sheet management through recent years. That reaffirmation signals continuity in the plumbing of monetary policy even as leadership changes at the top.
WARSH DROPS FORWARD GUIDANCE
One of the more striking features of Warsh's debut statement was the removal of forward guidance language on future rate moves. Under Warsh, the statement no longer commits the Committee to a particular path or set of conditions that would trigger subsequent action, giving the new Chair more discretion in shaping the message meeting by meeting.
The change in communication style is consistent with Warsh's long-standing scepticism of prescriptive forward guidance and his preference for a Fed that responds to data as it arrives rather than binding itself to future actions. It also gives the Chair greater flexibility to shift tone at press conferences and in subsequent statements without appearing to break from earlier commitments.
Markets will now focus on how Warsh explains the balance of risks in his press conference and in subsequent public appearances, given that the statement itself now carries less predictive weight than it did under the previous approach.
For borrowers and investors, the practical effect of the decision is unchanged short-term financing costs but a clearer signal that the Committee is prepared to tighten again this year if the data warrant. The split in the dot plot leaves the near-term path finely balanced.
The next FOMC meeting will provide the first opportunity to see how the reshaped statement is used to convey shifts in the outlook. Until then, attention will centre on Warsh's public appearances and on the incoming data on growth, inflation and the labour market that will shape the debate inside the Committee.