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Informist, Wednesday, Jun. 17, 2026

 

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--US FOMC keeps federal funds rate target range unchanged at 3.50-3.75% 
--US Fed officials see Fed funds target range 3.75% end-2026 
--US FOMC: Will maintain ample reserves in banking system 
--US FOMC: Will deliver price stability 
--US FOMC: Econ activity expanding at solid pace despite uncertainty 
--US FOMC: Productivity gains strong, unemployment has changed little 
--US FOMC: Inflation higher than aim, in part due to supply shocks 
--US FOMC: Job gains have kept pace with the workforce

 

NEW DELHI – The US Federal Open Market Committee under newly appointed Chair Kevin Warsh held the federal funds target range at 3.50-3.75% for the fourth straight meeting, as widely expected. The Summary of Economic Projections released along with the committee's statement showed an even split between US Federal Reserve officials who see the policy rate at current levels or lower by the end of 2026 and those who see rate hikes.

 

The committee's statement was shorter than previous meetings but suggested an increased focus on curbing inflationary pressures arising from the war in West Asia. Crude oil prices had risen sharply between February and May, before cooling in recent weeks heading to a peace deal between the US and Iran. US CPI inflation in May was 4.2% on an annual basis, its quickest pace in three years, and well above the medium-term target of the rate-setting panel.

 

"Inflation remains elevated relative to the Committee's 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy," the FOMC's statement said. "The Committee will deliver price stability."

 

Though the status quo on rates was expected, the statement and the unanimous vote from the 12-member FOMC led to a slight increase in expectations of a rate hike soon. The 10-year US Treasury yield rose to 4.46% at 0025 IST Thursday from 4.43% immediately before the rate decision was announced. 

 

Along with the commentary on inflation, the committee said economic activity was expanding at a solid pace despite higher uncertainty, in part due to the war. Moreover, job gains had kept pace with the workforce, with productivity growth and capital investment strong, the FOMC said. The US unemployment rate was 4.3% in May, the same as the prior two months and down from 4.4% in February.

 

The summary of economic projection showed the 18 US Fed officials split evenly on the rate trajectory. The median forecast by the end of 2026 was 3.75%, up from 3.25-3.50% seen in the last such projections in March. Six officials expect the federal funds target range to be 25 basis points higher by the end of the year, with three expecting rate hikes of 50 bps.

 

In contrast, only one member sees the policy rate lower than the current level and eight Fed officials saw the rate unchanged. Before becoming chair, Warsh had publicly criticised the forecasts and the "dot plot" projections have reduced by one from March, suggesting he has not given his forecasts for economic projections. 

 

Meanwhile, the Fed's preferred gauge of inflation is seen at 3.6% in the December quarter, up from 2.7% expected in March. The personal-consumption expenditures price index inflation is seen at 2.3% in the December quarter of 2027 as well before returning to the Fed's 2% aim at the end of 2028. 

 

The median GDP annualised growth forecast for the December quarter was revised 20 bps lower from the previous projections to 2.2%. The estimate for 2027 was left unchanged 2.3%. In the labour market, the unemployment rate was seen at 4.3% in the December quarter, down from 4.4% forecast in the last round of projections. It is seen steady at that level in the December quarter of 2027 as well.

 

In addition to the rate decision and the commentary on growth and inflation, the FOMC reaffirmed its policy of maintaining ample reserves in the banking system. Warsh's comments at the post-policy press conference will be closely tracked for the outlook on interest rates in the world's largest economy. He took office on May 22 after being picked by US President Donald Trump, with questions over the US central bank's independence amid increased political pressure to cut interest rates under previous chair Jerome Powell.  End

 

Reported by Aaryan Khanna

Edited by Akul Nishant Akhoury

 

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