Fed holds rates steady in first decision under Warsh

The Federal Reserve kept interest rates unchanged and sent a sharper message about inflation in Kevin Warsh’s first meeting as chair, preserving the benchmark federal funds rate in a target range of 3.5% to 3.75%. The unanimous decision came after the central bank had already cut rates by three-quarters of a percentage point in the latter part of 2025, but the new statement was shorter, simpler and stripped of language that had suggested officials were leaning toward future cuts.

That shift matters because it points to a different Fed culture under Warsh, one that appears less eager to guide markets toward a preset path. In his first press conference as chair, Warsh said the central bank would move away from forecasting its future actions and unveiled five task forces to review communications, the balance sheet, data sources, productivity and jobs, and the Fed’s inflation frameworks. The move marks an early break from the more expansive communication style associated with Jerome Powell and raises the prospect of a Fed that is more guarded, less predictable and more willing to surprise investors.

The policy statement also underscored why the Fed is resisting calls to ease. Warsh said the inflation goal remains 2%, and the June statement said inflation was still elevated relative to that target, partly because of supply shocks, including in energy. Economists had widely expected the Fed to hold steady, but the central bank’s Summary of Economic Projections showed a notable shift beneath the surface: nearly half of policymakers now see room for a rate hike later in 2026, and nine FOMC members projected hikes within the next year. That is a meaningful change for borrowers, because it keeps the door open to higher mortgage, auto and corporate borrowing costs even after months of expectations that the next move might be down.

Markets quickly absorbed the new message as a warning that the easing cycle may not resume soon. Stocks fell after the decision, with the S&P 500 down 0.9%, the Dow down 0.7% and the Nasdaq down 1%. Warsh, who was sworn in at the White House on May 22, 2026, declined to say whether he had spoken with President Donald Trump since taking office, though he said he had regular contact with Treasury Secretary Scott Bessent. That stance will be watched closely: Trump has publicly backed Warsh and continued to call for lower rates, but the first meeting under the new chair showed a Fed trying to reassert its independence at a moment when inflation, borrowing costs and political pressure are all moving in the same direction.