Fed holds rates steady in first meeting under Kevin Warsh

The Federal Reserve held its benchmark rate steady Wednesday, but Wall Street sold off anyway after policymakers signaled that borrowing costs may stay higher for longer. The Federal Open Market Committee voted 12-0 to keep the federal funds target range at 3.50% to 3.75%, and the Fed said the interest rate paid on reserve balances would remain 3.65% effective June 18.

The decision was the first under Kevin Warsh as chair. In the new projections, nine of 18 policymakers saw at least one rate hike by the end of 2026, and the median year-end policy-rate projection rose to 3.8% from 3.4% in March. The Fed said economic activity was expanding at a solid pace, but inflation remained elevated relative to its 2% goal, so investors heard not just a pause, but a warning that easier money may not arrive soon.

Markets reacted fast. CNBC said the Dow fell 507.12 points, or 0.98%, while the S&P 500 lost 1.21% and the Nasdaq Composite dropped 1.34%; Reuters reported that the 2-year Treasury yield rose to its highest level in more than a year as traders pushed up the odds of a hike later in 2026. The message from bonds was clear: the path of policy looked tighter than investors had expected going into Warsh’s first meeting.

For households, that keeps pressure on the prices they feel most directly. CNBC has noted that credit cards, auto loans and home equity lines are tied to the Fed’s short-term benchmark, while mortgage rates have remained above 6%, leaving buyers and refinancers with little relief. The same higher-for-longer backdrop can also weigh on 401(k)s through weaker stock prices and make corporate borrowing more expensive, which can slow hiring and expansion plans at firms that depend on credit to grow.