Sometimes the key developments coming out of an FOMC meeting have nothing to do with the Fed’s rate decision that day. Such was the case this week, when (as expected) the FOMC held the overnight rate steady.
The starting highlight was simply the fact it was the first meeting headed by newly appointed Fed Chair Kevin Warsh, who of course succeeded Jerome Powell. It’s a new Fed, at least to a certain degree, and the market has been eager to see what kind of Fed it will be.
Here’s what we learned:
The 2% Inflation Target Will Remain
This is important for confidence in the central bank as an institution. But it implies that the 4.2% CPI print last month is too high, especially as growth and the labor market seem resilient. So front-end rates are now pricing in 1.5 rate hikes this year, which is a hawkish shift on the market’s part. On the positive side, the re-commitment to the inflation target helps longer-dated bonds by reducing the risk premium as inflation expectations were higher than 2%.
Communication Will be Scarce
Brevity seems to be back in, because the statement accompanying the rate decision was short. That suggests the Fed is less likely under Warsh to spell out exactly what it’s thinking on every issue, leaving the market guessing to a certain extent.
Meanwhile, "forward guidance" will be toned down in the form of less data on what FOMC members think. This matters not because the market treated Fed guidance as gospel (it didn’t), but rather it means investors have lost something of a long-term anchor.
As with the short statement, the toning down of forward guidance should translate into elevated uncertainty.
The Pope and the Pope Emeritus
Sometimes a sitting Pope retires, but stays around the Vatican as Pope Emeritus, complicating matters for the incoming pontiff. Perhaps we may see a similar dynamic at play with today’s Fed. Powell is out as chair but has indicated he plans to continue as a Governor for now. If he ruled by himself, Warsh’s inclination may be to cut rates. But the FOMC is a committee, and Powell’s presence could serve as a hawkish counterweight to any dovish political pressures.
Between an increasingly opaque Fed and potential palace intrigue, future Fed policy is increasingly up in the air. To our minds, that suggests interest rate volatility is set to rise.
Important Information:
The foregoing is general market and economic commentary prepared by Kurv investment professionals as of 06/19/2026. The commentary is neither to be construed as general investment advice nor personalized investment advice. Our commentary is subject to change based upon our views of market, economic, political and related factors. We are under no obligation to provide updated commentary if our views change. To the extent the commentary covers market segments, market sectors, industries, commodities or other securities please note that Kurv professionals may effect transactions in such market segments, market sectors, industries, commodities or other securities which presents a conflict of interest. All Kurv investment professionals are subject to the firm’s Code of Ethics policy.
