Federal Reserve News · Full In-depth Report (June 2026)
Release time：2026-06-11
Publisher：GINZO
I. Current Policy Stance: Rates Held Steady, Rate Cut Expectations Fade Completely
1. Benchmark Interest Rate Overview
The federal funds rate remains within the range of 3.50% to 3.75%, a level that has been maintained since the Federal Open Market Committee (FOMC) meeting in March 2026. The last rate adjustment took place in March of the same year, when a 25-basis-point rate cut was implemented. No further changes to monetary policy have been made since then.
According to market pricing from the CME FedWatch Tool as of June 10, the probability that the FOMC will keep interest rates unchanged at the upcoming meeting on June 16–17 stands at 98.2%. The odds of a 25-basis-point rate cut are merely 1.8%, while the market has fully ruled out the possibility of a rate hike at this session.
2. Full-Year Outlook for 2026: Consensus on Extended Higher Interest Rates
On June 9, Reuters conducted a survey of 102 economists. Roughly 70% of respondents projected that interest rates would stay unchanged throughout 2026. Not a single economist anticipated a rate cut at the June meeting, and around 20% warned that a 25-basis-point rate hike could take place before the end of the year.
Major investment banks have also revised their outlooks one after another, leading to a uniform shift in policy expectations. On June 10, Goldman Sachs updated its report and completely scrapped its forecast for rate cuts in 2026, pushing the timeline for monetary easing to 2027. The bank expects two 25-basis-point rate cuts, one in June and another in December 2027. It also warned that persistent inflation may force the Federal Reserve to resume raising interest rates. Nomura, JPMorgan Chase, Barclays and other financial institutions have likewise withdrawn their forecasts for rate cuts within the year, reaching a consensus that rates will remain steady for the entirety of 2026.
3. Core Policy Rationale: Solid Economy, Stubborn Inflation and Strong Employment Rule Out Rate Cuts
The Federal Reserve’s current policy logic is clear-cut. With the economy continuing to expand, inflation holding above 3%, and the labor market remaining robust, conditions are not in place for a rate cut. Conversely, if inflation rebounds, a rate hike will be reinstated as a viable policy option.
II. New Chair Kevin Warsh: Hawkish Leadership Takes Over, Fed Policy Paradigm Shifts
1. Background and Policy Inclination
Kevin Warsh assumed office as the 17th Chair of the Federal Reserve on May 22, succeeding Jerome Powell, who had served in the role for many years. During the 2008 financial crisis, Warsh served as a Fed Governor. He is a staunch advocate for monetary discipline and a prominent hawk, prioritizing inflation control above all else. Due to his commitment to maintaining higher interest rates, he is widely regarded in the market as a defender of elevated borrowing costs.
2. Key Remarks Since Taking Office (Late May – Early June)
Warsh has repeatedly voiced his views in public appearances. He stressed that current inflation is persistent and entrenched, remaining far from the Fed’s long-term 2% inflation target, which means premature policy easing is unwarranted. On interest rates, he stated that higher rates must be maintained for an extended period, and discussions about cutting rates are premature at this stage.
He also advocated accelerating the pace of balance sheet reduction (quantitative tightening, or QT) to tighten global dollar liquidity and prevent overheating in financial markets. In addition, he pointed out that rising crude oil prices driven by heightened geopolitical tensions in the Middle East have triggered secondary inflationary effects, calling for heightened vigilance against associated risks.
3. Impact on the FOMC Dynamic
Warsh’s inauguration has drawn a line under the cautious stance and gradual rate cut strategy adopted during Powell’s tenure. Hawks now hold an overwhelming majority within the FOMC. The focus of policy deliberations has shifted from when to cut rates to whether further rate hikes are necessary.
III. Key Economic Indicators (May – Early June): Strong Employment and Rebounding Inflation Block the Path to Rate Cuts
1. May Employment Report (Released June 5)
U.S. nonfarm payrolls in May greatly exceeded market expectations. The economy added 172,000 new jobs, well above the forecast of 85,000. The unemployment rate held steady at 3.8% for three consecutive months. Average hourly earnings rose by 4.3% year-on-year, maintaining a strong growth pace and adding sustained upward pressure on inflation.
Employment across manufacturing, construction and service sectors was broadly solid, with no signs of weakness in any industry. The red-hot labor market reflects robust fundamentals in the U.S. real economy, demonstrating that the Fed has no need to lower rates to shore up growth.
2. May Consumer Price Index (CPI, Released June 10)
Inflation rebounded notably in May. The headline CPI rose 3.4% year-on-year, surpassing the market consensus of 3.3%. The core CPI, which excludes volatile food and energy components, increased by 3.7% year-on-year, also missing forecasts and highlighting strong inflation stickiness.
Breaking down the components: Driven by Middle East geopolitical risks, crude oil prices stayed around $90 per barrel, pushing energy prices up 12% year-on-year. Service inflation stood out with a 4.5% annual increase, as costs for housing, healthcare and transportation remained elevated for a long time. Goods prices rose 1.2% year-on-year; while the gain was moderate, the prior downward trend has reversed. Overall, the disinflation trend has stalled, and inflation remains a long way from the 2% policy target.
3. April Core Personal Consumption Expenditures (PCE) Price Index – The Fed’s Preferred Gauge
The core PCE index, the Federal Reserve’s most closely watched inflation metric, rose 3.2% year-on-year in April. This indicator has stayed above 3% for six straight months, falling at a slow pace and demonstrating extreme inflation persistence. Warsh has explicitly stated on multiple occasions that the Fed will not consider rate cuts until core PCE falls below 2.5%.
4. Beige Book (Released June 3, National Economic Review across 12 Districts)
The latest Beige Book compiled economic conditions across the Fed’s 12 regional districts. Economic activity expanded moderately in 10 districts, slowed slightly in one and remained flat in another. Household consumption showed a clear divergence: spending among high-income households stayed resilient, while middle and low-income households faced growing financial strains.
Price pressures are widespread and enduring. Higher energy costs have spilled over into transportation, packaging, food, chemicals and many other industries. For businesses, the growth rate of raw material and operating costs has outpaced that of product selling prices, squeezing corporate profit margins continuously.
5. Summary: Economic Data Do Not Support Monetary Easing
The overheated labor market eliminates the need for accommodative monetary policy to boost the economy. Rebounding and sticky inflation means easing would exacerbate inflationary risks. The overall economy expands moderately, with a low risk of recession. Taken together, the data leads to a clear conclusion: the Fed’s optimal strategy is to keep interest rates at the current high level, maintain a wait-and-see posture, and prepare for potential rate hikes.
IV. Official Remarks (June 5 – 10): Hawks Dominate, Opposition to Rate Cuts Becomes Mainstream
1. Hawkish Camp (Majority of Voting Members and Governors)
Schmid, President of the Federal Reserve Bank of Kansas City, delivered a speech on June 5. He argued that inflation remains stubborn, ruling out any rate cuts. He added that the Fed must resume raising rates immediately if inflation picks up again. He explained that surging energy prices have rippled across all goods and services. Heightened uncertainties in the Middle East will prolong the inflation cycle, so the rally in oil prices cannot be dismissed as a temporary shock.
Fed Governor Barr stated on June 6 that solid employment, steady consumption and recovering business investment prove the U.S. economy can fully withstand a high-rate environment. He also warned that financial asset valuations are stretched, and premature rate cuts would fuel asset bubbles and create long-term financial risks.
Logan, President of the Federal Reserve Bank of Dallas, noted on June 7 that core inflation has stagnated around 3.5% with limited downside momentum. Combined with persistent pressure from service inflation and wage growth, the window for rate cuts in 2026 has been completely closed.
2. Centrists (Wait-and-See Stance, Data-Dependent, Minority Group)
Williams, President of the Federal Reserve Bank of New York, is a leading centrist. On June 8, he adopted a cautious wait-and-see approach. He acknowledged that current interest rates are sufficiently restrictive to curb inflation, but policy effects take time to materialize. He opposed both immediate rate cuts and aggressive rate hikes, stating that monitoring incoming economic data is the most prudent strategy.
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